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Citizens Bank grows bullish on mortgages

| Thursday, Oct. 31, 2013, 12:01 a.m.

Citizens Bank is sprinting into headwinds that are scaring some of the biggest players in the mortgage industry.

Cooling demand for loans and refinancings have pushed big banks, including PNC Financial Services Group, to slash thousands of mortgage jobs. But RBS Citizens Financial Group, the parent of Citizens Bank, is ramping up its hiring.

What gives?

The regional bank is looking to capitalize on opportunities that it expects to be created as its bigger competitors pare their operations and leave some markets underserved. It plans to add hundreds of mortgage and small-business lenders across its 12-state footprint.

“Many of our peers are kind of retrenching,” CEO Bruce Van Saun said in a recent interview. “But there are selective opportunities where we can play some offense.”

Long-term borrowing costs remain historically low. Yields on 10-year Treasury notes fell to 2.49 percent on Wednesday with news the Federal Reserve will keep interest rates low to boost the economy. The average rate for a 30-year mortgage was 4.13 percent a week ago, down from as high as 4.58 percent in August.

But the Mortgage Bankers Association projects that rising interest rates next year will dampen loan demand.

Mortgage loan originations in the United States will drop about 32 percent to $1.2 trillion in 2014 from an estimated $1.7 trillion this year, the industry group said this week. That's because mortgage refinancing activity will keep falling as interest rates rise.

“We expect mortgage rates will increase above 5 percent in 2014, and then increase further to 5.3 percent by the end of 2015,” said Jay Brinkmann, MBA's chief economist. “As a result, mortgage refinancing will continue to drop.”

Home refinancing, estimated to total $1.08 trillion this year, will plunge about 57 percent to $463 billion in 2014, Brinkmann said.

The rise in interest rates hurt U.S. home sales last month. The National Association of Realtors said its index of existing homes under sales contracts in September fell to its lowest level in nine months.

The response from major banks has been to lay off people in droves. Bank of America plans to lay off about 3,000 mortgage workers this quarter, having slashed 3,600 mortgage jobs in recent months. That included 209 jobs at its mortgage call center in Upper St. Clair, which was closed in September.

Wells Fargo, the nation's largest mortgage lender, slashed 2,300 mortgage jobs in late August, but none in Western Pennsylvania, the bank said.

Although a comparatively much smaller player in mortgages, PNC Bank cut mortgage jobs recently. It laid off several dozen workers at each of its mortgage centers in three states, including dozens of employees at the bank's operation in Allegheny Center on the North Shore.

Nancy Bush, an analyst at NAB Research LLC, Annandale, N.J., said the decrease in the home mortgage business is likely to last for many years. Aging baby boomers are downsizing, not buying homes, and many college graduates are saddled with student debt that will postpone home-buying for years.

“But there are opportunities for mid-sized banks like RBS Citizens to pick up market share, and obviously Van Saun is targeting that,” said Bush.

Van Saun, who became RBS Citizens' CEO on Oct. 1, said its hiring will include people in the Pittsburgh region, where Citizens is the second-largest bank, with 130 area branches.

“We've historically punched under our weight in terms of our capacity to originate mortgages. So we're hiring more loan originators,” Van Saun said.

Van Saun declined to say how many people the bank employs in its mortgage business.

Rising mortgage interest rates ate into Citizens' loan volumes “a bit” over the summer, but rates remain low enough to attract home buying, he said.

As the economy continues its slow but steady recovery, Citizens wants to be “in position” to increase lending and services to small businesses, he said.

Thomas Olson is a Trib Total Media staff writer. Reach him at 412-320-7854 or

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