Larger spending pushes CFBank out of direct enterprise with shoppers

CFBank is stepping out of direct consumer mortgage lending as it leads higher spending in a changing market and will instead focus on traditional retail lending.

In particular, the bank is struggling with increased early repayment fees for loans granted through this channel. Combined with a lower refinancing volume and the associated revenue, the Columbus, Ohio-based bank expects an after-tax loss of $ 2.5 million for the direct customer business in the second quarter. These early payout expenses are expected to exceed $ 2 million through June 30.

In addition, factors such as mortgage loan price volatility, less refinancing, margin compression and increased competition made direct customer business less profitable in the current environment, the bank said.

Many mortgage lenders, like New Residential, are in the direct customer business to win back existing customers and raise refinancing.

Until recently, Consumer Direct was a plus for CFBank; it has been a major driver of fee income since joining in 2018. This has allowed the company to expand its presence and presence in other businesses and to build capital, said Timothy O & # 39; Dell, President and CEO, in a press release.

"The investments we have made in cash management people and capabilities over the past few years have resulted in significant growth in non-interest-bearing deposits and associated fee income from cash management products and services while investing in ours investments The commercial lending workforce has caused our commercial credit pipelines to hit all-time highs, "said O & # 39; Dell.

For the full year 2020, $ 2.2 billion was spent, up from $ 734 million in 2019, "due to the expansion of our lead-based mortgage business and increased sales activity," the 10-K filing stated Parent company CF Bankshares. But the bank sells all of its production on the secondary market free of service.

Without submitting specific volume figures, the filing of the first quarter indicated that "while origination was relatively strong in the quarter ended March 31, 2021, the margins have decreased significantly since the fourth quarter of 2020".

In filing for the period, it was found that CFBank had net revenue of $ 6.36 million for its mortgage operations for the first quarter, compared to $ 2.84 million a year earlier.

Lending revenues for the entire industry have been in downturn since mid-2020, according to research by the Mortgage Bankers Association.

Mortgage banks' total net production income was 124 basis points for the first quarter, compared to 137 basis points in the fourth quarter and 203 basis points in the third quarter.

The MBA results combine Retail and Consumer Direct, and as a group they had a net manufacturing income of 132 basis points for the first quarter. This is a decrease of 138 bps in the fourth quarter and 203 bps in the third quarter.

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