Cortland Bancorp subsidiary cease wholesale mortgage operations
Cortland Bancorp, holding company of The Cortland Savings and Banking Co., today announced 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.
With unease over an easy-money program undertaken by the Federal Reserve growing as the central bank is expected to wind down an $85 billion a month bond-buying program, interest rates have steadily climbed upward and undermined the secondary market.
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 wind down CSB’s operations.
With profits down thus far in the third quarter at CSB and with the trend expected to continue, according to a press release from Cortland Bancorp, the holding company’s board of directors and management decided Cortland Bancorp will now focus more heavily on its commercial and business banking lending operations, as well as its retail banking.