Higher spending drives CFBank out of direct-to-consumer arrangements

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CFBank is moving away from direct-to-consumer mortgage arrangements, citing higher spending in a changing market, and will instead focus on traditional branch retail lending.

In particular, the bank is facing an increase in prepayment charges related to loans from this channel. When combined with lower refinancing volumeand related income, the Columbus, Ohio-based bank expects to record an after-tax loss of $ 2.5 million in the second quarter from direct-to-consumer sales activities. This prepayment expense is expected to exceed $ 2 million until June 30.

In addition, factors such as mortgage price volatility, declining refinancing arrangements, squeezing margins and increased competition have made the direct-to-consumer business less viable in the current environment, said the bank.

Many mortgage lenders, like New Residential, are in the direct-to-consumer sales sector to win back existing customers, as well as source refinancing arrangements.

Until recently, the direct consumer was a plus for CFBank; since joining in 2018, he has been a major driver of fee income. This has allowed him to expand his footprint and presence in other companies, as well as build capital, said Timothy O’Dell, president and CEO, in a press release.

“The investments we have been able to make over the past few years in cash management personnel and capabilities are producing significant growth in non-interest bearing deposits, as well as commission income generated by cash management products and services. , while investments in our commercial lending staff have taken our commercial lending pipelines to unprecedented heights, ”O’Dell said.

It generated $ 2.2 billion for all of 2020, up from $ 734 million in 2019, “due to the expansion of our lead-based mortgage business and increased business. sales, ”parent company CF Bankshares 10-K said. But the bank sells all of its production on the serviced secondary market.

Without providing specific volume figures, its first quarter record pointed out that “while assemblies were reasonably strong in the quarter ended March 31, 2021, margins have declined significantly since the fourth quarter of 2020.”

Its record for the period showed CFBank generated $ 6.36 million in net income in the first quarter from its mortgage business, up from $ 2.84 million a year earlier.

Loan origination revenues for the entire industry have been declining since mid-2020, according to studies by the Mortgage Bankers Association.

Total net production income for mortgage lenders was 124 basis points in the first trimester, compared to 137 basis points in the fourth quarter and 203 basis points in the third quarter.

The MBA results lump retail and direct consumption together, and as a group they had a net production income of 132 basis points for the first quarter. This is down from 138 basis points in the fourth quarter and 203 basis points in the third quarter.



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