With rates soaring, Community Bank of Florida forgoes nationwide mortgages

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BayFirst Financial Corp. in St. Petersburg, Fla., announced its intention to pull out of the national mortgage market, citing a rapid decline in demand in a year in which interest rates soared.

The $921 million asset bank said on Wednesday it had begun the process of removing its nationwide network of residential mortgage origination offices. It specifically cited a “precipitous decline in mortgage volumes and the uncertain outlook for mortgages in the coming quarters,” according to its press release.

The company estimated the after-tax expenses associated with closing the business line would be between $3 million and $4 million. BayFirst said it will continue to offer mortgages in its local Florida markets.

“Given the impact of lower mortgage volume on the business’ operating performance over the past few quarters, as well as the uncertain outlook for mortgages in the short to medium term, we have made the decision difficult to terminate our nationwide network of residential mortgage origination offices,” BayFirst CEO Anthony Leo said in the statement.

Amid soaring inflation that topped 9% this year and hit its highest level in decades, Federal Reserve policymakers repeatedly hiked interest rates to make borrowing more expensive, cut spending and ease pressure on prices.

Policymakers this week voted to raise their benchmark rate by three-quarters of a percentage point to a target of 3% to 3.25%. The rise puts the Fed’s interest rate above 3% for the first time since 2008.

The Fed has raised its interest rate by 75 basis points in three consecutive meetings and by 3 percentage points in total since March. Policymakers have signaled that further rate hikes are still likely this year.

Mortgage banking had boomed in recent years — when rates were low — and several community banks, including BayFirst, expanded their home lending operations beyond their traditional footprints to capitalize. But as borrowing costs climb this year, demand declines and staff and office costs begin to outpace mortgage income.

The Mortgage Bankers Association said inquiries to buy new homes in the week ending September 16 fell 30% from a year earlier. Refinancing applications fell by 83%.

Freddie Mac said on Thursday that the 30-year fixed-rate mortgage averaged 6.29% this week, more than double the 2.88% level a year earlier.

“The housing market continues to face headwinds as mortgage rates rise again this week,” said Sam Khater, chief economist at Freddie Mac. “Influenced by higher rates, home prices are falling and home sales have declined.”

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