Union winding down residential mortgage unit

union hq

Union is headquartered in the James Center at 1051 E. Cary St. (BizSense file photo)

Richmond’s biggest bank is getting out of the residential mortgage game.

Union Bank & Trust on Wednesday announced a plan to wind down its Union Mortgage Group subsidiary, instead passing the torch of its home loan origination to The Federal Savings Bank, a Chicago-based lender.

Union CEO John Asbury said this is not a sale of the mortgage subsidiary and no money changes hands, nor will Union receive any long-term revenue from the arrangement. It will simply offer its customers the ability to get a home mortgage through TFSB beginning June 4.

“Because of the infrastructure and technology involved, it’s very difficult to be a small-scale mortgage company,” Asbury said. “While our team does a very good job, the fact is mortgage is roughly 1 percent to our bottom-line income. And it’s a famously cyclical business and a business that needs additional investment.”

Union originated about $460 million in residential mortgages last year, the bulk of which were then sold off into the secondary market. That was down about $54 million from 2016. The Federal Savings Bank, by comparison, does around $4 billion in origination volume annually, Asbury said.

Union’s mortgage segment turned a profit of around $1 million in 2017, compared to the $71 million produced by the rest of its business, according to its annual report.

The deal with TFSB was fueled by Union wanting to get out of doing mortgages itself, while still wanting the ability to offer the product to customers.

“We are far better off to focus our resources on our core relationship business and – rather than continue to invest where we would not get a reasonable return – partner with somebody that already had scale and a great reputation,” Asbury said.

The company discussed the change with its mortgage group on Wednesday, informing them that 73 of UMB’s roughly 100 employees would be offered jobs with TFSB. Those getting cut are employees that had been in UMB’s back-office functions, which TFSB already has in place.

Union will continue doing residential construction loans, just not the permanent mortgages.

Banks eliminating a mortgage arm isn’t unprecedented in Richmond. Xenith Bank, which Union acquired earlier this year, made a similar move a couple years ago.

As for TSFB, the deal with Union marks the company’s first big push into Virginia. It said in a release that it plans to continue hiring mortgage professionals in the region.

union hq

Union is headquartered in the James Center at 1051 E. Cary St. (BizSense file photo)

Richmond’s biggest bank is getting out of the residential mortgage game.

Union Bank & Trust on Wednesday announced a plan to wind down its Union Mortgage Group subsidiary, instead passing the torch of its home loan origination to The Federal Savings Bank, a Chicago-based lender.

Union CEO John Asbury said this is not a sale of the mortgage subsidiary and no money changes hands, nor will Union receive any long-term revenue from the arrangement. It will simply offer its customers the ability to get a home mortgage through TFSB beginning June 4.

“Because of the infrastructure and technology involved, it’s very difficult to be a small-scale mortgage company,” Asbury said. “While our team does a very good job, the fact is mortgage is roughly 1 percent to our bottom-line income. And it’s a famously cyclical business and a business that needs additional investment.”

Union originated about $460 million in residential mortgages last year, the bulk of which were then sold off into the secondary market. That was down about $54 million from 2016. The Federal Savings Bank, by comparison, does around $4 billion in origination volume annually, Asbury said.

Union’s mortgage segment turned a profit of around $1 million in 2017, compared to the $71 million produced by the rest of its business, according to its annual report.

The deal with TFSB was fueled by Union wanting to get out of doing mortgages itself, while still wanting the ability to offer the product to customers.

“We are far better off to focus our resources on our core relationship business and – rather than continue to invest where we would not get a reasonable return – partner with somebody that already had scale and a great reputation,” Asbury said.

The company discussed the change with its mortgage group on Wednesday, informing them that 73 of UMB’s roughly 100 employees would be offered jobs with TFSB. Those getting cut are employees that had been in UMB’s back-office functions, which TFSB already has in place.

Union will continue doing residential construction loans, just not the permanent mortgages.

Banks eliminating a mortgage arm isn’t unprecedented in Richmond. Xenith Bank, which Union acquired earlier this year, made a similar move a couple years ago.

As for TSFB, the deal with Union marks the company’s first big push into Virginia. It said in a release that it plans to continue hiring mortgage professionals in the region.

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