After 20 years out of the residential mortgage business, San Antonio-based Frost Bank (CFR) is getting back into business after the real estate market endured its toughest year in over a decade.
“We’ve had a lot of customer demand for it,” Frost Bank CEO Phil Green said in an interview with Yahoo Finance. “It was really the time where we could see the demand was there… and thought it would be a good asset class for us for a long time.”
Demand for homes slowly began to pick up after higher borrowing costs pushed many first-time buyers out of the market.
Home signings rose 2.5% mom in December, ending a six-month decline. New home sales were also up 2.3%, with the median new home selling price in December being $442,100.
“I’m bullish on Texas long-term…[and] In the short term, honestly,” Green said. “That means many people in the state will be buying homes that we can help.”
According to the San Antonio Express-News, by 1998 the bank’s loan portfolio had grown to about $415 million in outstanding home loans, accounting for 11.4% of its portfolio. Two years later, the bank stopped making residential mortgage loans.
To date, two home loans have been completed under Frost’s employee-only mortgage pilot program. After a short test run, the mortgage loan offer will be made available to existing customers.
Green expects the program to launch “within a few quarters.”
“We all want people’s first experiences with it to be great,” he noted. “The last thing we want is people thinking we have a clunky system to not have the support of the brokerage community for us, [and] not being able to do those things that we want to do for clients.”
Despite a cooler housing market, the biggest benefit of Frost’s relaunch was the “reduction of [refinance] activity,” Green said.
“[This] has given us a tremendous talent pool to build this organization from the ground up,” said the executive.
The latest data from the Mortgage Bankers Association, released last week, showed that funding activity was down 76% year-on-year.
When Frost initially decided to exit the mortgage origination business, the technology was outdated and affecting the customer experience. But the industry has evolved since then, signaling Green there’s still an opportunity to better expand operations.
Meanwhile, the bank has multiplied its locations in several major cities in Texas, including 24 branches in Houston, with 8 more to be added over the next two years, and 30 locations in the Dallas area.
Austin, Texas/USA – Austin, Texas skyline with the Frost Bank Tower.
Mortgage team collapse
As the housing market slows, many banks are going out of business. Or at least reduce the number of employees exposed to the industry.
JPMorgan Chase, for example, fired hundreds of employees in its mortgage department earlier this month, according to Bloomberg, as the volume of mortgage lending fell 60% over the past year due to rising interest rates.
And the company isn’t alone, as Wells Fargo, Citi and USAA have also initiated hundreds of job cuts at their mortgage lenders as higher interest rates dampen demand for home loans and refinancing.
The company has already hired about 80 loan officers for Frost Bank and plans to expand operations.
“We really have an opportunity to build closer relationships with our customers than we have before,” said Green.
Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter @daniromerotv
Click here for the latest economic news and economic indicators to help you with your investment decisions
Read the latest financial and business news from Yahoo Finance
Download the Yahoo Finance App for Apple or Android
Follow Yahoo Finance on Twitter, Facebook, Instagram, flipboard, LinkedInAnd youtube
Don’t miss interesting posts on Famousbio
