Unit no longer strategic fit
By MortgageDaily.com staff
1/25/2006

Reduced operating margins may force Irwin Financial Corp. to sell its conforming mortgage business.

The sale of Irwin Mortgage is one of the strategic alternatives the Columbus, Ind.-based bank holding company said Wednesday it is considering because the unit "is no longer a good fit" for effective growth.

Over "the past five years we have seen significant changes in the market for conventional first mortgages," said Irwin Financial Chairman Will Miller in the announcement. "The customer experience has changed through technological advances, borrower sophistication and the apparent willingness of large lenders to price using aggressive assumptions about the value of cross selling opportunities."

He added record low rates are unlikely to return soon, and the "conventional mortgage operations, particularly our servicing activities, have grown to a size where we believe they can be managed and grown more effectively within another organization."

On the other hand, Irwin Home Equity "has developed strengths in mortgage credit evaluation, administration, and servicing that will permit us to serve niches within the mortgage market that have more consistent margins and less volatility," the parent company said.

Irwin expects "disappointing" results from the two mortgage segments for the fourth quarter 2005, each with a small net loss, according to the announcement.

"We have had a very good run with our colleagues at Irwin Mortgage, but need to make changes in our strategies in reaction to changes in the environment," Miller said. "This is a strategic change to help the Corporation to continue to enjoy creditworthy, profitable growth in the long-term."

Almost a year ago, Irwin announced it would sell a portion of its retail operations, and all of its net branch and credit union lending operations in separate transactions with Pinnacle Financial Corp. and American Home Mortgage Corp.

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