Flagstar Bank Layoffs and Restructuring Efforts Explained

Flagstar Bank has recently announced a series of layoffs and restructuring efforts. The bank's decision to downsize is largely due to a decline in revenue from its mortgage business.

The layoffs are expected to affect approximately 700 employees, which is about 10% of the bank's workforce. This includes both hourly and salaried staff from various departments.

The restructuring efforts will focus on improving the bank's efficiency and reducing costs. Flagstar will be consolidating some of its operations and eliminating redundant positions.

The bank's goal is to reduce its expenses by about $100 million annually, which will help improve its profitability and competitiveness in the market.

Flagstar Bank has reduced its mortgage staff by 420 employees, or 20%, since the beginning of the year.

The bank cited declining mortgage volume as the reason for the reduction, echoing mortgage firms both large and small who have made cuts in recent weeks.

Flagstar Bank's new owner confirmed 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.

The layoffs represented about 10% of all employees at the newly combined bank, which had 7,800 employees as of September 30.

Flagstar Bank made cuts to its retail mortgage operation and laid off hundreds of staffers, according to laid off employees, with some receiving severance payments based on tenure and job position.

The company offered severance payments, but it's unclear if departing employees were offered extended health benefits.

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.

Flagstar originated $27 billion in mortgages last year, down about 38% year-over-year, according to figures by Inside Mortgage Finance.

The bank originated $6 billion in the first nine months of 2022 through the retail channel, down 54% year over year, per IMF data.

The wholesale channel reached $17 billion in the same period, down 35%.

Flagstar's performance deteriorated as time went on, declining from $8.2 billion from January to March 2022 to $4.1 billion from October to December 2022.

Flagstar Bank has undergone significant restructuring efforts in recent months. The bank's new owner, New York Community Bancorp, confirmed that a substantial number of employee layoffs occurred late last week as a result of the merger.

The layoffs are part of a broader effort to restructure Flagstar's mortgage division, which has been impacted by the nationwide downturn in the mortgage business since 2021. The division's employee count has dropped from 2,100 in 2021 to under 800.

Flagstar's mortgage division will now operate solely as an "in-branch" model, with many separate home lending offices in Michigan, New York, and New Jersey closing. This represents 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.

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Here are the key statistics related to the layoffs and restructuring:

The layoffs and mortgage division restructuring will have a one-time cost of $12 million to $13 million, with most of those costs being severances for the laid-off workers.

Flagstar Bank has been making significant cuts to its mortgage operation, with hundreds of employees laid off in recent weeks.

The bank's mortgage staff has been reduced by 20% since the beginning of the year, with 420 employees let go.

Flagstar Bank's new owner, New York Community Bancorp, confirmed that the mortgage division is now under 800 employees, down from a high of 2,100 in 2021.

The layoffs and restructuring are a result of the nationwide downturn in the mortgage business since 2021, with mortgage originators facing unprecedented increases in interest rates.

Flagstar Bank's mortgage division will now operate solely as an "in-branch" model, with many separate home lending offices closing, resulting in a 69% reduction in the number of lending offices.

The combined bank has 395 bank branches in nine states, and the layoffs and restructuring are expected to improve profitability in the mortgage business during the current downcycle.

The bank's main headquarters is in Hicksville, New York, and Flagstar's Troy office is the combined bank's regional headquarters.

Flagstar Bank originated $27 billion in mortgages last year, down about 38% year-over-year, and the bank's performance deteriorated as time went on, declining from $8.2 billion from January to March 2022 to $4.1 billion from October to December 2022.

The layoffs occurred on Thursday morning with no warning, and employees were shut off from the company's systems, computers, and emails immediately.

The company offered severance payments based on tenure and job position, but did not provide Worker Adjustment and Retraining Notification (WARN) related to the layoffs.

Flagstar Bank, No. 19 among mortgage lenders in America, and New York Community Bank, one of New York City's largest multifamily lenders, announced a $2.6 billion merger deal in April 2021.

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