Sterling in Michigan suspends mortgage program

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Sterling Bancorp in Southfield, Mich., has suspended one of its residential lending programs.

The $3.3 billion-asset company said in a regulatory filing Monday that it had “voluntarily and temporarily suspended” its Advantage Loan program as part of an internal review of the program’s documentation procedures.

“It is presently difficult to estimate how long this suspension might last,” the filing said.

The company has been auditing documentation for past loans, while implementing more systems and controls to make sure its policies and procedures are followed.

Sterling said the loan program is “a material component” of total loan originations, adding that the suspension should lead to slower loan growth and fewer loan sales. The company added that it doesn’t expect any credit-related issues “due to the substantial amount of equity required for each borrower and the resulting strong collateral package for each loan.”

The company said it has been looking to diversify loan production by expanding in areas such as including multifamily, tenant-in-common, construction and commercial-and-industrial loans.

“It is too early to assess the level of success that the company will have in replacing the lost loan production volume from the Advantage Loan program’s temporary suspension,” the filing said.

Residential real estate made up about 86% of Sterling’s total loans on Sept. 30.

Sterling said in its quarterly filing with the Securities and Exchange Commission that the Advantage Loan program accounted for 80% of its residential loan production over the first nine months of 2019.

The company also disclosed that it fired two of the program’s top producers in November following an internal compliance investigation. Those lenders had accounted to 15% of Sterling’s 2019 residential loan production, through Sept. 30.

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