- Key Insight: Why depository banks continue to exit the mortgage industry.
- What's at Stake: Local homebuyers seeking mortgage options as more regional depositories exit the origination space.Overview bullets generated by AI with editorial review.
Another depository is exiting the mortgage industry in order to cut expenses, continuing a trend that has persisted through the
Enterprise Bank & Trust, headquartered in Clayton, Missouri, confirmed the move on its third-quarter earnings call last week, saying it looked at multiple areas of business in the company that were subscale.
"We also recently announced that we're exiting the mortgage business as it relates to an originator," said Jim Lally, CEO of Enterprise Financial Services Corp., on the call. "So we're taking expenses out where we're not adding a great deal of value and really can scale."
Enterprise joins
Northpointe Chairman and CEO Chuck Williams said in an earnings call last week that volumes could no longer carry the overhead of mortgage operations, citing economic headwinds. Another executive said the deal doesn't involve the transfer of loans and similar assets. The bank will retain other lending activity, including a mortgage purchase program comparable to warehouse lending.
Under the terms of the agreement, CMG will pay Northpointe 15 basis points on any first-lien mortgage originations closed through the mortgage origination channels until Dec. 31, 2028, the bank announced in a press release this week.
Unlike the Northpointe transaction, Enterprise has not announced a buyer or referral partner for its mortgage business.
Why banks should stay in mortgage
Despite recent examples, Rich Swerbinsky, executive director of the Ohio Mortgage Bankers Association and founder of Upward & Onward Consulting, said banks that previously left the mortgage industry, or never conducted business in it, have been rethinking their decision.
At the American Bankers Association's annual conference, multiple banking executives made the case for staying in mortgage without building a 40-person department, Swerbinsky said.
"I think the wind's at the back of depositories right now," he wrote in his newsletter, Swerbs Blurbs, Wednesday. "Capital rules are loosening, portfolio lending is back in play, talent is moving, and all this AI has people craving local, in-person relationships. Consumers need more options, especially local ones."
Enterprise's third-quarter results
In addition to shutting down its mortgage business, the company withdrew from some banking activities in markets, particularly in the West, where it lacked interest to properly compete, Lally said in the call.
The moves come after Enterprise posted continued growth in its broader lending business. The company recorded a 3.8% quarterly and 6.6% annual increase in total loans to $12.3 billion but a net income of $42.4 million, which was down 6.2% year over year.
