Xenith Bankshares in Richmond, Va., is getting out of the mortgage origination business.
The $2 billion-asset holding company disclosed in a regulatory filing that its Xenith Bank reached an agreement Friday with Gateway Bank Mortgage in Wilmington, N.C., to sell certain assets to Cornerstone Home Lending, a multistate lender based in Houston.
Under the agreement, Cornerstone will pay Xenith Bank $86,657 in exchange for Gateway's furniture and equipment and its rights to real property leases and other assets necessary to operate Gateway's business. The bank will also transition Gateway's operations, which include originating, closing, funding and selling first-lien residential mortgage loans, to Cornerstone.
When the deal closes, Gateway will be required to stop accepting new mortgage loan applications, though it will continue to manage all applications still being processed, according to a press release accompanying the filing.
Xenith Bank and Gateway expect the application process and investor funding of the loans to be "substantially complete" by Dec. 31.
Xenith said it decided to leave the mortgage business because of the regulatory compliance costs and the scale required to compete in the mortgage banking market, among other reasons.
T. Gaylon Layfield III, Xenith Bankshares' chief executive, said in the release that while Gateway "contributed to our earnings, we did not believe our share of the earnings was adequate to compensate our shareholders for the risks inherent in the mortgage banking business."