BANK OF AMERICA ANNOUNCES EXIT FROM CORRESPONDENT MORTGAGE BUSINESS!
Bank of America is attempting to sell its correspondent lending division as it looks to divest itself of additional parts of its home loan divisions. Plagued by upwards of $1 Trillion of problem home mortgages, Bank of America, currently the biggest U.S. Bank, plans on cutting 3,500 jobs over the next few weeks. These moves are an effort by the bank to raise capital to meet new industry standards.
Correspondent lenders fund loans and then sell them to the larger banks. Banks, including Bank of America, use these correspondent lenders to generate more loans for them to sell to investors like Fannie Mae and Freddie Mac. Bank of America will then service the loans to generate additional revenue.
Loans purchased from these correspondent banks accounted for around 47% of Bank of America’s mortgage originations, or nearly $27.4 Billion, in the first quarter of 2011, according to a Wall Street Journal article. There are many of these Correspondent Lenders or Mortgage Banks currently originating these loans.
Bank of America spokesman Dan Frahm said, “We intend to sell the correspondent mortgage lending division or, if a suitable deal is not identified, we will consider other options.” The correspondent division of Bank of America currently employs over 1,000 people.
What does this mean to you as a Realtor? Fewer choices and less competition. Many Mortgage Bankers use Bank of America's correspondent division for their specialty loan products because Bank of America is the Master Servicer, designated for many of these bond programs. FHA 203S Rehabilitation loans, the CalSTRS Home Loan Program for Teachers, CalHFA, and the FHA NHF Grant programs for down payment assistance are just a few of the programs that could be affected. By denying access to Mortgage Bankers for these programs, you could see a dramatic reduction in availability for these programs and declining levels of service in the near future.
We are one step closer to having a handful of giant banks control the entire mortgage industry. This is just another sign of a constantly changing lending environment, pounded by new Federal regulations and scrutiny over the past several years. Most of the recent legislation has done little or nothing to fix the problems. Instead, the result has been to eliminate consumer choices and increase the costs of obtaining a home mortgage.
NOTE: Doug Bullwinkel is a licensed California Mortgage Loan OriginatorNMLS #281609 for Vitek Mortgage with over 30 years in the Real Estate and Mortgage Industry. He specializes in Niche loan programs including the CalPERM-CalPERS Member Program, CalSTRS Home Loan Program for Teachers, VA and CalVet for Veterans, FHA, USDA, FNMA Homepath, CalHFA, CHF Grants and more. His website is LenderSolutions.com. He can be reached at (800) 636-8910 for more information