The changing tide
This week, Bank of America has said it will close its correspondent mortgage lending business by the end of the year which means they will no longer buy mortgages from other banks, effectively cutting half of their mortgage business, given that $180 billion worth of home loans came from the business in the last year alone.
Reuters reports that the move is directly because of the bank’s inability to find a buyer for the operation, after announcing in August that it would sell the business or wind it down. The unit funds loans made by smaller banks. After cutting 200 employees from the business in the last 90 days, the bank has said they plan on transferring the remaining 1,200 correspondent lending employees to other divisions with transfers beginning as early as October 17th.
In order to meet new, tighter capital requirements, Bank of America CEO Brian Moynihan has been aggressive about reducing the bank’s risk by selling off or severing the riskier of their operations. After being in the role for barely a year, Moynihan continues to seek to raise funding to cover the mortgage losses they’ve incurred and as regulatory and legal concerns continue to mount. Bank of America made headlines recently for announcing they would need to drop 30,000 positions in coming years to cut expenses, most of which will be done through natural attrition.