BankUnited stops making retail mortgage loans, lays off workers

A security guard looks out the door of a BankUnited branch in South Miami in this Miami Herald file photo.
A security guard looks out the door of a BankUnited branch in South Miami in this Miami Herald file photo. MIAMI HERALD

BankUnited has stopped offering retail residential mortgage loans to consumers and laid off some of its workers.

South Florida’s largest locally based bank said new residential mortgages weren’t generating enough business but current mortgage holders won’t be left in the lurch.

“We remain committed to honoring all of our current loan commitments,” said Mary Harris, a spokeswoman for BankUnited.

Harris said the Miami Lakes-headquartered bank is maintaining other aspects of its mortgage business, including mortgage warehousing, buying mortgages around the country and its servicing business. She declined to say to how many workers had been laid off.

South Florida banking consultant Ken Thomas said he was “shocked” by the news.

“One of the biggest needs we have in this community is affordable housing, and when you have the biggest South Florida-based bank backing off residential mortgage lending that raises eyebrows,” he said. “If a small bank did this, that’s one thing. But this is BankUnited.”

Thomas said BankUnited’s private-equity owners may be positioning the bank for a sale. The bank received a $4.9 billion federal government bailout after failing in 2009 because of bad mortgage loans it made during the real estate boom.

(Only IndyMac Bank’s $11 billion failure was more costly for the government during the last downturn.)

“This is not a great result for taxpayers, especially in one of the most economically lopsided communities in the nation,” Thomas said.

Because of high home prices and low wages, Miami is one of the least affordable housing markets in the U.S.

Private equity investors bought BankUnited from federal regulators a few months after it failed in 2009, taking it public two years later.

The bank returned to profitability by focusing on commercial lending and entering the New York market with the acquisition of Herald National Bank.

Federal regulators periodically evaluate how well banks meet the credit needs of their community. BankUnited received a “satisfactory” rating in its last Community Reinvestment Act evaluation in 2012. Residential lending is one aspect that regulators study. That means the bank may have to make more loans for small businesses, affordable housing developments and other community needs in order to maintain its good standing.

The bank now has 98 retail branches in Florida and six locations in NYC. It has a five-star rating from Bauer Financial.

BankUnited made $454 million in new residential mortgage loans as of the third quarter of 2015, according to a federal regulatory filing.

One industry source familiar with the bank said BankUnited had bet big on expanding its residential lending business last year but couldn’t generate enough volume because of compliance costs and slowing Latin American investment in Miami.

“They’re not the only bank that is considering this,” said the source, who asked not to be named. “This could be the first of many.”

Local banks still in the game

But other local banks said they remained committed to offering residential mortgages.

“We had a record year in 2015, and we’re looking for more in 2016,” said Howard Levine, executive vice president for residential lending at Sabadell Bank. “That retail mortgage is a huge part of our business.”

Levine said that Sabadell, which focuses on the upper end of the housing market, originated more than $400 million in new residential loans last year. “If you have enough volume, you can cover the compliance costs,” he said.

Jay Pelham, executive vice president at TotalBank, said offering residential mortgages helped the bank maintain a strong relationship with clients.

“It’s difficult to say I want to make a loan to your business but I’m not able to give you a loan to buy a home,” Pelham said.

TotalBank’s residential mortgage lending rose to $217 million in 2015, up from $200 million in 2014, according to the bank.

Said City National Bank spokesman Eddie Dominguez: “I just don’t see how you can serve clients without providing them mortgage solutions.”

Nicholas Nehamas: 305-376-3745, @NickNehamas