The Bank Slate


Sterling in Mich. still dealing with defunct loan program

Sterling Bancorp in Southfield, Mich., is continuing to reckon with issues tied to a mortgage program it abruptly shuttered in 2019. 

The $2.5 billion-asset company said in a press release Monday that it is making progress tied to various investigations into the defunct Advantage Loan Program. 

Thomas O’Brien, who was hired as chairman, president and CEO in mid-2020 to address Sterling’s issues, said in the release that the company had implemented all of the steps needed to comply with a formal agreement with the Office of the Comptroller of the Currency. 

O’Brien said such compliance was “critical to our ability to close out the government investigations” into the loan program. He expressed optimism that all outstanding issues with the government could be resolved by the end of this year. 

“The damage done by the Advantage Loan Program is significant and its consequences are painful for all stakeholders,” he said. 

Sterling reported that nonperforming loans increased by nearly 2% in the second quarter from a quarter earlier, to $55 million, reflecting a $4.3 million increase of mortgages delinquent by 90 days or more.

O’Brien said most of those delinquent loans are from the Advantage Loan Program. 

Finally, Sterling said it cut 35 mortgage jobs after outsourcing its residential lending to Promontory MortgagePath. Sterling, which incurred $400,000 of severance costs during the second quarter, said the positions had total annual compensation and employee benefits of $3.7 million.

Costs tied to the MortgagePath arrangement are largely volume driven but Sterling would pay “a modest fee” if volume falls short of production hurdles. 

“The MortgagePath program allows us to continue an active participation in the residential loan market without the fixed costs of a full-time staff,” O’Brien said. “Our residential lending product is now introduced to our customers through an online Sterling channel and integrated into MortgagePath’s fully compliant system.”

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