Bank of America drops in mortgage rankings

Fri, Jan 27, 2012, 00:00

BANK OF America was the fourth-biggest mortgage lender in the US in the fourth quarter of 2011, continuing its descent in the rankings after it stopped buying loans made by smaller banks.

The second-largest US bank in 2008 became the biggest mortgage originator after buying Countrywide Financial, but it has been gradually paring back the business as it copes with losses from the disastrous acquisition.

Citigroup moved ahead of Bank of America in the fourth quarter, with about $23 billion in mortgage loans, slightly ahead of Bank of Americas $22.4 billion in loans, according to data released yesterday by industry publication Inside Mortgage Finance.

Wells Fargo remained the largest mortgage originator by far, making $120 billion in loans.

That meant the bank made 30 per cent of all loans in the quarter, up from about 27 per cent in the third quarter. JPMorgan Chase was the second-biggest lender in the quarter, with about $42 billion in loans.

In October, Bank of America said it was exiting correspondent lending by years end, stripping out about half of its production as it focused on making loans directly to its own customers. The bank now has about 6 per cent market share in the US, less than the 7.8 per cent it held in 2007 before buying Countrywide.

That acquisition, which brought to the bank loads of bad loans and related lawsuits, has not worked out on two fronts for Bank of America, said Guy Cecala, publisher of Inside Mortgage Finance.

“Not only are they looking to abandon the servicing side of the business, they’re looking to abandon the origination platform,” he said.

While the bank is missing out on newer loans made under stricter underwriting standards, decreasing its profile in the mortgage business is likely to be good for its stock price, he said. “It will be welcomed by shareholders and analysts,” Mr Cecala said.

After falling 58 per cent in 2011, Bank of Americas shares are up more than 30 per cent this year.

Bank of America and Citigroup are among lenders that may find it more difficult to boost profits and capital after the Federal Reserve pledged to keep its benchmark interest rate low until at least late 2014. – (Reuters)