Bloomberg News

BofA to Shutter Correspondent Lending Unit After Auction Fails

October 03, 2011

Oct. 4 (Bloomberg) -- Bank of America Corp., the largest U.S. lender by assets, will close its correspondent-mortgage unit after negotiations with a bidder failed, leaving the employment status of about 1,200 workers in limbo.

The business will be shut by year-end, said Terry Francisco, a spokesman for Charlotte, North Carolina-based Bank of America. The company is “actively looking” to find positions for some of the affected workers, he said.

“We ended our search to find a buyer for that business and we are moving ahead with winding it down,” Francisco said in a telephone interview. “We couldn’t find a suitable buyer.”

Bank of America said in August that it planned to sell or close the correspondent unit, in which the firm buys mortgages marketed by third-party lenders, and that it was in talks with a potential bidder. Discussions with Fortress Investment Group LLC sputtered over price, American Banker reported. Gordon Runte, a spokesman for New York-based Fortress, declined to comment.

Chief Executive Officer Brian T. Moynihan, 51, has said he intends to make Bank of America a “smaller, more focused company” through assets sales, where possible. The bank is seeking to trim $5 billion from expenses by slashing about 30,000 jobs over the next few years.

The mortgage business posted a $14.5 billion loss in the second quarter as investors demanded the repurchase of defective loans. The bank split the division earlier this year, separating distressed loans from performing mortgages and new lending.

Correspondent originations accounted for $21.8 billion, or 54 percent, of the bank’s mortgage lending in the second quarter, the bank said in August. That compares with $27.4 billion, or 46 percent, in the first quarter.

“The key reason we’re taking this action is we want to focus on our own consumer channels,” Francisco said. “We want to focus our attention on consumers who choose our brand.”

Bank of America shares have plunged 59 percent this year, falling below $6 yesterday for the first time since 2009, on mounting mortgage costs and signs of a global economic slowdown.

--Editors: Dan Reichl, Peter Eichenbaum

To contact the reporter on this story: Hugh Son in New York at hson1@bloomberg.net

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net


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