BOA to sell correspondent business

Bank of America Corp. intends to sell its correspondent mortgage business, as the troubled lender looks to narrow its focus and bolster its financial strength, said people familiar with the situation.

Employees could be notified as soon as Wednesday that the lender has decided to exit the correspondent channel because it no longer fits with the long-term strategy for its mortgage unit. The company decided to get out roughly four to six weeks ago, following a review led by mortgage chief Barbara Desoer. The business employs more than 1,000 people.

The move represents another repudiation of Bank of America's 2008 purchase of Countrywide Financial Corp. That deal turned the Charlotte, N.C., lender into one of the nation's largest mortgage players but also saddled it with hundreds of thousands of delinquent loans and an array of mortgage-related lawsuits. The bank has already exited the wholesale business, which involves buying loans from independent brokers, and it has stopped offering reverse mortgages.

Correspondents fund loans and sell them to larger lenders such as Bank of America, the nation's largest bank. It has used the correspondent channel to build origination volume and make money by re-selling the loans to other parties and then servicing them.

Loans purchased from correspondents accounted for 47% of Bank of America's mortgage originations, or $27.4 billion, in the first quarter of 2011, according to Inside Mortgage Finance. Bank of America had a 24.3% share of the correspondent market in the first quarter, second only to Wells Fargo & Co.

"It is a huge retreat," said Guy Cecala, publisher of Inside Mortgage Finance. "Exiting correspondent altogether will reduce their volume significantly."

Bank of America has been looking to sell noncore assets as it tries to bolster its capital position. On Monday it agreed to sell half its shares in China Construction Bank Corp.