Washington Trust sees decline in new residential mortgage business

BUILDERS STARTED on the most single-family homes in January in more than four years.  / BLOOMBERG FILE PHOTO/DANIEL ACKER
NEW HOUSING is in limited supply in Rhode Island, curtailing residential mortgage originations for banks such as Washington Trust. / BLOOMBERG FILE PHOTO/DANIEL ACKER

WESTERLY – Decreases in regional banking leader Washington Trust’s residential mortgage totals in the last quarter reflect the rise in interest rates this year rather than a softening of the market itself, Washington Trust executives said Tuesday.

The Washington Trust Co.’s mortgage banking revenues – largely from servicing fees and sales commissions – dropped to $2.62 million in the third quarter ended Sept. 30, the bank reported late Monday. That was down 10.7 percent from the second quarter and 13.6 percent from the third quarter last year.

The bulk of the bank’s housing mortgage business is in the Greater Boston area, with Rhode Island a distant second. The bank also does some of that business in Connecticut, mainly in the Hartford suburbs.

“We had a little slowdown in growth,” Washington Trust Chairman and CEO Edward O. Handy III told Providence Business News.

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“We don’t see a change in the market,” added Mark K. W. Gim, Washington Trust’s president and chief operating officer. Much of the decline comes from “interest rate pressure, rather than a decision [by the bank] to pull back” from home lending.

The bank’s mortgage numbers moving forward also may be impacted by a seasonal winter slowdown in home buying in the fourth quarter of this year or the first quarter of next year, Gim added.

Washington Trust’s residential mortgage loan originations totaled $214.7 million in the third quarter. That was down 14.5 percent from the second quarter and 8 percent from the third quarter last year. Most of the loans originated in the third quarter were for sale to the secondary market, rather than for retention in the bank’s own mortgage portfolio.

In addition, residential mortgage loans sold totaled $132.1 million in the third quarter. That was up 25.3 percent from the second quarter, but down 10.3 percent from the third quarter last year. Washington Trust did not retain mortgage servicing rights on most of the mortgages sold in the last quarter.

Total value of Washington Trust’s residential real estate loans was $1.35 billion in the third quarter. Of that total, the majority – $838.6 million – came from Massachusetts. Rhode Island accounted for $347.6 million of that total, followed by Connecticut with $145.9 million. All other states accounted for only $17.1 million.

A limitation in the bank’s primary mortgage markets, especially in Rhode Island, is a lack of new housing supply, Handy said. He also said the bank’s mortgage underwriting standards remain high.

Scott Blake is a PBN staff writer. Email him at Blake@PBN.com.

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