Photo by James Sanna | Commercial Record staff

Rhode Island-based bank Citizens is exiting the wholesale mortgage lending business, five months after exiting the indirect auto lending business, as well.

The decision was driven by “the evolving market conditions and economic pressures, along with our strategic focus on relationship-based lending,” the bank’s head of consumer lending Eric Shuppenhauer said in a statement.

HousingWire first reported the bank’s decision, citing a letter it obtained from one of Citizens’ broker partners.

Wholesale mortgage lenders fund loans originated through middlemen, whether fellow banks and credit unions or mortgage brokers. Citizens is just the latest home lender to exit the wholesale business as the residential mortgage market continues its dramatic shrinkage, with prominent lenders like LoanDepot also exiting the business earlier this year.

Until now, Citizens was one of the few large banks that made residential mortgages itself while also operating wholesale and correspondent lending divisions.

“Citizens continues to reposition its consumer franchise to focus on areas that provide the most opportunity for us to grow and deepen relationships with customers, as reflected by our recent exit of indirect auto originations. While we are discontinuing originations in the mortgage wholesale channel, we will continue to service all mortgage customers who were previously originated in this channel,” Shuppenhauer said. “Mortgage lending remains an important part of our bank’s strategy given its importance in our customers’ lives, and we will continue to provide a variety of mortgage products through our retail mortgage and correspondent lending channels.”

According to data from The Warren Group, publisher of The Commercial Record, the Connecticut residential mortgage market has shrunk by significantly over the last two years. Only $13.49 billion worth of purchase and refinance loans were issued in the first three quarters of 2023, compared to $24.38 billion over the same period in 2022 and $37.04 billion in the first three quarters of 2021 – 45 percent and 34 percent declines year-over-year in 2023 and 2022, respectively. This year has so far seen the lowest dollar volume of home mortgages originated in Connecticut in the first three quarters since at least 2018.