Citizens Bank to end wholesale originations

Citizens Bank will cease wholesale mortgage originations in December, joining a list of lenders that have left the segment over the past two years.

In a message this week notifying mortgage partners, the Providence, Rhode Island-based bank said existing relationships would be terminated and broker submissions no longer accepted after Dec. 6. Loan submissions received prior to close of business that day would be processed under normal protocols. 

Citizens also emphasized it would continue servicing existing mortgages originated through the channel and its correspondent lending operations would not be affected by the decision.

The bank cited ongoing industry challenges, as well as a broader strategic shift, as reasons behind its exit. 

"With the evolving market conditions and economic pressures, along with our strategic focus on relationship-based lending, we have made a decision to discontinue originations in our mortgage wholesale channel," said Eric Schuppenhauer, Citizens' executive vice president and head of consumer lending in a statement sent to National Mortgage News. 

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"Citizens continues to reposition its consumer franchise to focus on areas that provide the most opportunity for us to grow and deepen relationships with customers, as reflected by our recent exit of indirect auto originations," he added. 

Third-party originations at Citizens totaled $2.3 billion in the third quarter, according to its recent earnings release. 

Despite the pullback, Schuppenhauer indicated mortgage lending would remain "an important part of our bank's strategy given its importance in our customers' lives" and that Citizens would offer products through retail and correspondent lending channels. 

The bank's move comes at the end of a bruising year for mortgage lenders, who saw activity decline to its lowest level since the 1990s due to a prolonged rise in interest rates. The Mortgage Bankers Association found current lending activity 17% lower than the same time last year.

Following waves of layoffs and consolidation, leaders at the trade group said more cuts would be necessary to properly rightsize operations, warning mortgage companies they should expect struggles to continue in 2024.

The challenges of making wholesale lending consistently profitable have led several companies to similarly depart from the wholesale space in the past two years, including Loandepot and Guaranteed Rate. The number one originator by volume last year, United Wholesale Mortgage, has also touted its aggressive pricing strategy as key to dominating the space by pricing competitors out of the market with ultra-low rates.

Among depository banks, US Bank immediately cut wholesale operations previously belonging to MUFG Union following the closure of their merger at the end of 2022.

But in spite of the cutbacks, some wholesale specialists also see growth opportunities in the channel, upping their investments this year.