A decision by Bank of America Corp. to exit the correspondent business could slash the company’s originations by nearly half and leave JPMorgan Chase & Co. as the nation’s second-biggest residential lender.
BofA disclosed in October 2010 that it would exit the wholesale lending channel. It was the second time that it shunned mortgage broker originations; the first was in December 2007. The repeat was the result of its July 2008 acquisition of Countrywide Financial Corp., which included Countrywide’s wholesale operation.
In last year’s statement announcing the wholesale retreat, a BofA executive said, “Bank of America remains committed to purchasing and financing loans from correspondent lending clients, including those approved to originate loans from mortgage brokers.”
The statement went on to say that the bank intended to “build upon our leadership position in that market to provide enhanced liquidity to the smaller financial institutions and independent mortgage companies that supply mortgages as our correspondent clients.”
But there has been an apparent change of strategy.
In a statement Wednesday, BofA Senior Vice President of Communications Dan Frahm confirmed that the company has decided to exit the correspondent channel.
“We intend to sell the correspondent mortgage lending division or, if a suitable deal is not identified, we will consider other options, including winding down the correspondent lending business in an orderly manner,” Frahm said in the statement. “At this time, our correspondent lending operations continue business as usual.”
The Wall Street Journal, which first reported the bank’s plans Wednesday, indicated that the decision was made last month and followed a review headed by Bank of America Home Loans President Barbara Desoer. The Journal said that roughly 1,000 employees work in the division.
Following its Countrywide acquisition, BofA was the biggest mortgage lender in the third-quarter 2008 with $59 billion in originations. No. 2 Wells Fargo & Co. closed $51.0 billion during the same period.
Data previously reported by BofA indicates that total residential originations amounted to $100 billion during the first half of this year, second only to Wells Fargo’s $148 billion. Last year’s production at BofA was reported at $307 billion.
Using figures published by Inside Mortgage Finance, the Journal put the correspondent share of home-loan volume at BofA at 47 percent.
The exit from correspondent lending leaves BofA as a shell of its former self. Without correspondent originations, BofA’s first-half production would have been only around $53 billion — putting BofA in the No. 3 spot behind JPMorgan Chase & Co., which reported $71 billion in first-half volume.
In addition to the departure from wholesale and correspondent originations, BofA said in February that it had decided to exit the reverse business.
“Consistent with other recent decisions in the home loans business — our exit from the wholesale lending and reverse mortgage businesses, and selling Balboa Insurance — we are strengthening our focus on serving the needs of the bank’s 58 million households and supporting growth across the franchise,” Frahm added.
