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Citizens Bank Bids Farewell To Wholesale Mortgage Channel

Christine Stuart
Nov 16, 2023
CIT Group Inc. has completed the sale of its Financial Freedom reverse mortgage servicing business and the related reverse mortgage portfolio to an undisclosed buyer

In a strategic pivot, the Providence-based banking giant will stop accepting new wholesale mortgage submissions.

Citizens Bank will exit the wholesale channel beginning in December. 

The Providence, Rhode Island-based bank notified its mortgage partners that it would no longer be accepted after Dec. 6. However, it will continue servicing existing mortgages through the channel and its correspondent lending operations would not be affected by the decision.

The bank cited ongoing industry challenges, as well as a broader strategic shift, as reasons behind its exit. Citizens Bank was the 10th-largest mortgage lender by loan count in 2022. 

Third-party originations at Citizens totaled $2.3 billion in the third quarter, according to its recent earnings release. 

According to Modex, volume on a monthly basis has dropped from $453.5 million in June 2023 to $203.8 million in September 2023. Its total volume for the year was still $3.89 billion and its average monthly volume was $324 million. 

"With the evolving market conditions and economic pressures, along with our strategic focus on relationship-based lending, we have made a decision to discontinue originations in our mortgage wholesale channel," Eric Schuppenhauer, executive vice president and head of consumer lending, said. "Citizens continues to reposition its consumer franchise to focus on areas that provide the most opportunity for us to grow and deepen relationships with customers, as reflected by our recent exit of indirect auto originations." 

The bank started downsizing its mortgage division back in April

The bank's move comes at the end of a bruising year for mortgage lenders, who saw activity decline to its lowest level since the 1990s. The Mortgage Bankers Association found current lending activity 17% lower than the same time last year.

Following waves of layoffs and consolidation, leaders at the trade group said more cuts would be necessary to rightsize operations, warning mortgage companies they should expect struggles to continue in 2024.

The challenges of consistently profitable wholesale lending have led several companies to similarly depart from the wholesale space in the past two years, including loanDepot and Finance of America.

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