Fishers, Ind.-based First Internet Bancorp is exiting the consumer mortgage business this quarter as market conditions continue to weaken.
The decision includes both the $4.2 billion bank’s digital, direct-to-consumer nationwide mortgage platform that originates residential loans for sale in the secondary market and its consumer mortgage and construction-to-permanent business.
“The combination of housing prices, housing supply, economic uncertainty and higher interest rates have caused mortgage applications nationally to plunge to their lowest level in 26 years,” the bank stated.
By exiting the consumer mortgage business, First Internet Bancorp is expected to reduce its total annual non-interest expenses by $6.8 million and increase annualized pre-tax income by $2.7 million. First Internet expects to incur a $3.3 million pre-tax expense in the first two quarters of this year.
The Federal Open Market Committee has already raised interest rates seven times since last March, bringing its federal funds rate from near-zero to 4 to 4.25 percent. Though inflation measured by the Consumer Price Index has slightly dropped, the FOMC is still expected to raise interest rates several more times this year, albeit at a slower pace, to drop inflation closer to its 2-percent long-term target.
First Internet Bancorp’s decision came shortly after Westbury, N.Y.-based New York Community Bank announced that it is exiting its out-of-market mortgage business to focus on retail operations within its nine-state footprint. The $62.9 billion bank’s decision came shortly after it acquired Troy, Mich.-based Flagstar Bank. “The substantial Fed policy shift resulted in significantly higher residential mortgage rates,” New York Community Bank officials stated in a press release.“This had a negative impact on the business.”