43
Cortland mortgage subsidiary closing
cortland
Cortland Bancorp, holding company of The Cortland Savings and Banking Co., announced Friday that its subsidiary CSB Mortgage Co. will cease wholesale mortgage operations effective immediately as a result of rising interest rates and uncertainty for the business in the broader market.
CSB was established in 2011 to engage in wholesale mortgage banking for the origination of residential mortgage loans through brokers in Ohio and other states for eventual sale in the secondary market.
As a wholesale mortgage lender, CSB acted as a middleman and acquired mortgage loans by processing applications and underwriting them.
It would service the loans and eventually sell them to other investors in the secondary market to turn a profit. A mortgage broker finds lenders to originate a loan.
Unease is growing over an easy-money program initiated by the Federal Reserve. Investors have grown skittish about the central bank’s plan to wind down the purchase of $85 billion worth of bonds and mortgage-backed securities each month.
Interest rates have steadily climbed upward as a result and weakened the secondary market in the process.
Though rates still remain at a historical lows, with both 15- and 30-year fixed rates hovering around 4 percent Friday, the holding company’s board of directors and management decided Cortland Bancorp will focus more heavily on its commercial and business banking lending operations, as well as its retail banking.
With profits down thus far in the third quarter at CSB and with the trend expected to continue, management decided to shut down CSB and wind down its operations.
CSB will continue to process and fund all current loans, but it will no longer accept new applications.
Cortland Savings Bank will continue to make residential mortgage loans to bank customers, and a group of employees will be retained to phase out CSB’s operations.
It’s unclear how many employees will be affected by Friday’s announcement.
Questions seeking additional comment were not returned by the bank Friday.
Cortland Bancorp reported a year-end profit of $4.18 million in 2012.