Blue Ridge Bankshares joins peers in mortgage pullback

Blue Ridge Bankshares in Virginia has agreed to exit mortgage banking by selling unspecified assets to an undisclosed buyer, adding to the growing trend of depositories pulling back from home loans.

The sale of Monarch Mortgage-branded assets, with undisclosed terms, aligns with the bank's strategy to address deposit runoff. Blue Ridge has already reduced its fintech exposure and is working to gain release from a related consent order.

Blue Ridge Bank's holding company, which includes Blue Ridge Bank and BRB Financial Group, is selling these assets amid industry pressures from enforcement actions and shrinking mortgage margins.

"Blue Ridge Bank's strategic plan calls for it to return to core community banking and to closely analyze all nonbanking lines of business for strategic importance and profitability," CEO Billy Beale said when asked about the sale's drivers. "The bulk of Monarch originations are outside the Blue Ridge Bank footprint and we did not have the scale to generate appropriate returns."  

The bank will work to ensure that there is no interruption to loans that are in its pipeline at the time of the sale, which is on track to occur this quarter, pending clearance of all necessary approvals.

Monarch, a retail lender, has been funding and selling both traditional refinance and purchase mortgages in addition to single-close construction-to-perm loans. Its buyer plans to remain active in these product lines, Beale said. In a market where refinancing activities have been limited, lenders have leaned more heavily into construction-to-perm financing and builder ties in efforts to originate more home-purchase loans.

Blue Ridge Bank acquired Monarch and a wholesaler called LenderSelect back in the early 2000s when the mortgage market was booming. The bank later sold LenderSelect in 2023 amid a wave of consolidation driven by a rise in mortgage rates. 

Other depositories that have reportedly staged mortgage asset sales or exits this year include TD Bank, WaFd Inc. and Ally Financial. WaFd is the holding company for Washington Federal Bank.

Last year, New York Community Bancorp — which has since rebranded as Flagstar — also shrunk its mortgage footprint, selling some assets to Mr. Cooper. (Mr. Cooper later turned around and sold some of the acquired assets again to A&D Mortgage.)

To be sure, not all community institutions have been looking to exit mortgage banking due to profitability concerns with some finding the business to be favorable with opportunities for expansion.

Mercantile Bank in Michigan, a lender that sells off the majority of its loans, reported market share gains and a 50% rise in mortgage banking income during the fourth quarter earnings compared to the same period a year earlier.

Primis Bank in Virginia, which bought Seacoast Mortgage in 2022 and opened a warehouse-lending division last year, reported in fourth-quarter 2024 earnings results that it's seen "strong profitability metrics" in home lending and recently established new construction-to-perm builder partnerships focused on government lending.

How policy proceeds under the Trump administration could play a key role in the mortgage outlook for banks.

Pending rules for bank capital could be less onerous for mortgage assets than originally planned under the Biden administration and there are plans for widespread housing reform that could decrease what's currently a large government-related presence in the industry.