SI Financial Group Inc. in Willimantic, Conn., said Monday that it has terminated its deal to buy Fairfield Financial Mortgage Group Inc. in Danbury, Conn., because of anticipated changes in the regulation of mortgage companies.
Lawmakers and regulators have promised a response to the recent meltdown in the subprime mortgage market, and Rheo A. Brouillard, SI Financial's president and chief executive officer, said that the uncertain regulatory climate has made the $757 million-asset thrift company leery about acquiring a mortgage lender.
"The board said, 'Every day you pick up the paper and there's more legislation being talked about or some rules being promulgated by the regulators,'" Mr. Brouillard said. "It was really a situation where until things settle down, and we know what the rules will be, it's hard to know … when is a good time to go into the business or not."
Mr. Brouillard stressed that the board's concern was with the industry generally, not Fairfield specifically. He said that Fairfield seems to be financially healthy, and estimated that less than 10% of its loans are made to subprime borrowers. Fairfield did not return a call Monday.
SI Financial, the parent company for Savings Institute Bank and Trust Co., announced in September that it had agreed to buy Fairfield. It said at the time that Fairfield had originated more than $386 million of loans in the previous 12 months. (The price of the deal was not disclosed.)
Founded in 1998, Fairfield has loan offices in Texas, Massachusetts, New York, New Jersey, New Hampshire, and Pennsylvania and is a licensed mortgage banker in eight other states. It would have been renamed SI Mortgage Group Inc. and operated as a subsidiary of Savings Institute Bank and Trust. Because Fairfield would have been a unit of a federally chartered thrift, it would have been free to make mortgages in all 50 states.
Mr. Brouillard said that SI Financial initially viewed the deal as an opportunity to expand its lending and to generate noninterest income.
He said the company would not revisit the idea anytime soon. "If the whole mortgage industry settles down, we may," he said. "But I don't know that."
