FLAGSTAR BANCORP INC. /Bloomfield Hills, Michigan With Home Sales Rising, Lender Builds Earnings.(THE NEW AMERICA)

Byline: Steve Watkins

Interest rates are low and home sales are high. That's music to the ears of Flagstar Bancorp Inc.

The firm owns Flagstar Bank, which has $6.4 billion in total assets. That makes it the largest Michigan-based independent savings institution. It's just a speck on the nation's banking scene, but as a home mortgage lender Flagstar is among the country's 20 largest companies.

That's where the growth is, as interest rates fall and home sales power ahead.

Loan originations are on pace to more than double this year and top $20 billion. Refinancings make up much of that. When rates fall as fast as they have been -- 275 basis points since year-end -- homeowners tend to refinance longterm mortgage loans to lock in lower rates.

Flagstar is set up to take advantage. Of its home loans, 90% come from other sources, mainly from mortgage brokers. That helps, because it doesn't have to develop a huge organization to generate loans on its own.

"This type of structure does very well in (refinancing) booms," said Paul Miller, analyst at Friedman, Billings, Ramsey & Co. "They can pick up additional volume, but when the industry slows down they don't have the fixed overhead cost structure."