HomeStreet Bank Announces Intent to Seek Buyers for its Home Loan Center-Based Mortgage Origination Business and Servicing Rights

HomeStreet to continue offering mortgages through bank locations,
online, and affinity relationships

. (Nasdaq:HMST) (the “Company” or “HomeStreet”), the parent
company of HomeStreet Bank (“HomeStreet Bank”), announced today that it
has retained Keefe, Bruyette & Woods to seek buyers to acquire its
stand-alone home loan centers and related mortgage origination
personnel. Additionally, the Company has retained MountainView
Transaction Advisory, LLC to seek buyers for the majority of its single
family mortgage servicing rights principally related to loans originated
by those home loan centers and personnel. If sales of these businesses
are completed, the Company expects to retain a smaller mortgage
operation integrated with the commercial and consumer banking business,
with originations sourced through the branch network, online banking
services, and affinity relationships.

“The Board of Directors made the difficult decision to explore the
potential sale of our mortgage banking business after extensive
deliberations, ultimately concluding that this potential change would be
in the best long-term interests of the Company and its shareholders,”
said Mark K. Mason, Chairman, President, and Chief Executive Officer.
“We are considering a sale at this time after having taken substantial
steps in the last two years to improve the profitability of our mortgage
banking business while expecting a near term recovery in industry volume
and profitability. Unfortunately, it is still unclear when, and to what
extent, industry conditions will improve. Single family mortgage loans
remain an important part of our asset diversification strategy and part
of a broad array of products that we offer to our customers. Assuming
the sale of our mortgage banking business, we will continue to offer
mortgages, but the scale of this business line will be substantially
smaller, focused on our retail deposit network and regional markets, and
positioned for ongoing profitability.”

HomeStreet is taking these steps due to the persistent challenges facing
the mortgage banking industry. The increasing interest rate environment
has reduced the demand for refinance mortgages, and higher home prices
have decreased the affordability of home purchases. Both factors
continue to put downward pressure on mortgage origination volumes. In
addition, historically low new and resale home inventories in many of
HomeStreet’s primary markets continue to adversely impact the volume of
available purchase mortgages.

Further, the challenging regulatory environment, including changes to
loan underwriting and disclosure rules and increased data integrity
requirements, have combined with higher loan officer compensation to
significantly increase loan origination costs. Non-bank lenders are
regulated by different regulators with different approaches to
compliance and regulatory oversight than bank mortgage lenders. This
condition has resulted in uneven compliance interpretations, guidance,
and enforcement risks between banks and non-bank lenders.

Additionally, in September 2017, the banking regulators proposed a rule
to simplify and reduce the capital burden for banks holding mortgage
servicing assets. To date, a final rule has not been published, and
given the recent proposal of a Community Bank Leverage Ratio which omits
the previously expected capital relief for such assets, HomeStreet no
longer expects the proposed rule to reduce the capital burden for banks
holding mortgage servicing assets to be enacted or implemented. The
regulatory capital required today for holding mortgage servicing assets
is onerous, and in conjunction with declining hedge profitability as a
result of a flattening yield curve, our return on invested capital in
this line of business has been adversely impacted.

HomeStreet will provide updates on the sale exploration process at such
time as it determines that further disclosure is appropriate or required.

Forward-Looking Statements

This press release contains forward-looking statements concerning
HomeStreet, Inc. and HomeStreet Bank, and their operations, performance
and likelihood of success. All statements other than statements of
historical fact are forward-looking statements. In particular,
statements regarding the Company’s anticipated future performance and
financial condition, the success of finding one or more buyers
interested in buying our mortgage business or servicing rights on terms
that we can accept, the ability to consummate a transaction if one is
identified, the ability to sell our large-scale mortgage business in the
time expected while retaining key staff for ongoing mortgage operations,
and the anticipated impacts of financial markets, regulation, monetary
policy and shifting customer demands on the mortgage business generally
and our mortgage operations specifically are forward looking in nature
and are subject to many other factors, including changes in market
conditions that may impact our ability to meet our expectations.
Forward-looking statements are based on many beliefs, assumptions,
estimates and expectations of our future performance, taking into
account information currently available to us. Such statements involve
inherent risks and uncertainties including operational, compliance,
strategic, and reputational risks, many of which are difficult to
predict and are generally beyond HomeStreet’s control. You should
consider, among other things, the risk factors included in our periodic
reports filed with the Securities and Exchange Commission, including but
not limited to our most recent Quarterly Report on Form 10-Q for the
third quarter of 2018. Forward-looking statements speak only as of the
date made, and we do not undertake to update them to reflect changes or
events that occur after that date. HomeStreet is not responsible for any
statements or disclosures regarding any party other than HomeStreet,
Inc. or HomeStreet Bank that may be contained in this press release.

About HomeStreet, Inc.

HomeStreet, Inc. (Nasdaq:HMST) is a diversified financial services
company headquartered in Seattle, Washington, serving consumers and
businesses in the Western United States and Hawaii through its various
operating subsidiaries. The company currently operates two primary
business segments: Mortgage Banking, which originates and purchases
single family residential mortgage loans, primarily for sale into
secondary markets; and Commercial & Consumer Banking, including
commercial real estate, commercial lending, residential construction
lending, retail banking, private banking, investment, and insurance
services. Its principal subsidiaries are HomeStreet Bank and HomeStreet
Capital Corporation. Certain information about our business can be found
on our investor relations web site, located at
Homestreet Bank is a member of the FDIC and an Equal Housing Lender.


Investor Relations:
Gerhard Erdelji, 206-515-4039

Media Relations:
Michael Brandt, 206-876-5506


Sloane & Company
Dan Zacchei/Joe Germani, 212-486-9500

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