Flagstar Bank confirms layoffs, big restructuring in wake of merger
Flagstar Bank's new owner confirmed Tuesday that it did a significant number of employee layoffs late last week when it restructured its mortgage division to adjust to the nationwide downturn in the mortgage business since 2021.
Thomas Cangemi, president and CEO of New York Community Bancorp., which acquired Troy-based Flagstar in a December merger, said in an earnings call that Flagstar's mortgage division is now under 800 employees, down from a high of 2,100 in 2021, back when mortgage rates were at historic lows and the business was booming.
He did not specify the number of layoff notices handed down Thursday, which employees have said was in the hundreds, but did state that the reductions represented about 10% of all employees at the newly combined bank. The combined bank had 7,800 employees as of Sept. 30, a bank representative previously said.
Prior to the merger, Flagstar had been reducing its mortgage staff throughout 2022 by several hundred employees.
Cangemi said it was decided to restructure the Flagstar mortgage division shortly after the merger closed Dec. 1. Going forward, the direct-to-consumer mortgage business will operate solely as an "in-branch" model. As a result, many separate home lending offices in "footprint locations" in Michigan, New York and New Jersey will close, ultimately resulting in a 69% reduction in the number of lending offices.
The combined bank has 395 bank branches in nine states.
The restructuring aims to make the bank a more well-rounded commercial bank that is less dependent on a single line of business, such as the highly cyclical mortgage business, Cangemi said.
“These decisions are among the most difficult our senior leadership team has to make," Cangemi said. "However, they are necessary to ensure the long-term success and viability of our mortgage business.
"These actions are expected to improve profitability in the mortgage business during the current downcycle, while still allowing us to participate in the upside in the event the interest rate environment becomes more favorable. Despite these actions, we remain one of the top players in the mortgage business."
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The layoffs and mortgage division restructuring will have a one-time cost of $12 million to $13 million, said Lee Smith, a longtime Flagstar executive and now president of the combined bank's mortgage division. Most of those costs are severances for the laid-off workers, and some of it is for exiting leases.
"We are in one of the toughest mortgage markets of the last 25 years," Smith said.
The U.S. mortgage industry was expected to do about $2.2 trillion in mortgage originations last year, down significantly from the $4.4 trillion in mortgages in 2021, according to the Mortgage Bankers Association. For 2023, mortgage originations are forecast to total $1.9 trillion.
All of New York Community Bancorp. is to rebrand as Flagstar in late 2023, with the full computer systems conversion set to happen in the first quarter of 2024.
The bank's main headquarters is in Hicksville, New York. Flagstar's Troy office is the combined bank's regional headquarters.
“We are confident that a unified brand will position us to thrive," Cangemi said. "We will have one bank, one brand, one culture. Our new brand will be Flagstar."
Contact JC Reindl: 313-222-6631 or jcreindl@freepress.com. Follow him on Twitter @jcreindl.
This article originally appeared on Detroit Free Press: Flagstar Bank confirms layoffs, big restructuring in wake of merger
