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Wells Fargo and Citigroup are laying off hundreds of employees in their mortgage units as rising interest rates cause home loan refinances to plummet. More layoffs by banks with heavy exposure to mortgages are expected this year.
July 19 -
The "we are all buyers" mentality held by most of Chicago's large community banks changed when Taylor Capital agreed to sell to MB Financial for $680 million. It could signal the beginning of long-awaited consolidation in the Chicago area.
July 15 -
The largest U.S. bank's forecast of a steep decline in mortgage volume and continued regulatory uncertainty raised alarm bells about the whole industry. Possible growth in credit cards offered a ray of hope.
July 12 -
The future is bright for mortgage servicers, but his PE firm agreed to sell Homeward Residential to Ocwen because it had held the investment long enough — and owning stock in a bigger servicer will pay off, billionaire Wilbur Ross said.
October 3
Taylor Capital Group (TAYC) in Chicago is in talks to sell its mortgage bank in tandem with its own sale to MB Financial (MBFI).
The $5.9 billion-asset Taylor told employees of its Cole Taylor Mortgage unit in
"We are currently in more detailed discussions with several private-equity firms," Willie Newman, the mortgage bank's president, wrote in the email. "The nonbank segment of the mortgage banking industry has grown dramatically in the last several years. Therefore, this is a very exciting time to work with private equity to determine how to build a major mortgage market participant."
The talks are a sign of the times. Many banks are struggling to cope with the effects of rising interest rates, while PE firms have been actively consolidating mortgage firms.
Wells Fargo (WFC) and Citigroup (NYSE:C) are
Meanwhile , nonbanks like Ocwen Financial (OCN), Nationstar Mortgage and others have been busy acquiring a wide range of mortgage companies, and investors like
Taylor announced it would
The mortgage bank, which was launched in 2010, has propelled Taylor's earnings over the last couple of years. Despite that, Mitchell Feiger, the chief executive of MB, says his interest in Taylor sits squarely on its commercial lending prowess.
"I started out telling you how Taylor's traditional commercial banking business fits with MB's, because that's what we are most interested in in this transaction and we are acquiring Cole Taylor Bank," Feiger said during a conference call to discuss the deal last week. "That's the key driver of our decision."
Feiger complimented the performance of the mortgage bank unit but basically said he could take it or leave it. MB is not a big mortgage player on its own.
"You need to know that our financial and strategic analyses for this transaction assume very, very little future contribution from the mortgage company," Feiger said in the call. "So low in fact that we would have been willing to buy the bank only for just about the same price that we are paying for the bank and the mortgage company."
To that end, Feiger said the deal allows for Taylor to attempt to sell the business. Proceeds in excess of $57 million plus expenses after tax would go to Taylor's shareholders.
Feiger said he doesn't think the mortgage bank will sell, or sell at a price that would give Taylor shareholders additional cash.
"We expect and are assuming that even if Taylor markets the mortgage business for sale, a sale is either unlikely to occur, or if it occurred, would be very unlikely to yield an amount sufficient to generate additional merger consideration for Taylor's shareholders," he said.
Despite his discussions with private-equity players, Newman said he was still trying to change MB's mind about the value of the mortgage business and how it could grow as part of the consolidated company.
"In order to better understand the opportunity with MB Financial, we are initiating more in-depth discussions with executives from MB," Newman said in the email.
Feiger said in the conference call that the speed of the negotiations between MB and Taylor is part of the reason for his reluctance toward the mortgage unit.
"We've been moving at a very fast pace here we've been talking in depth let's say for four weeks," Feiger said. "That is not enough time for me to have thought through and investigate thoroughly enough the mortgage business to understand what direction we should take it or would want to take it."
