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B of A Finds Improvement in Mortgage Banking Results

JAN 15, 2014 12:26pm ET
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Bank of America saw its first-mortgage originations plunge 47% from the third to the four quarter but loan production income more than doubled due to lower provisioning for loan repurchases.

The giant banking company has seen a 25% increase in mortgage applications in January due to the recent dip in mortgage rates, B of A executives noted in their fourth-quarter earnings call Wednesday.

The company’s purchase market share has been growing and continued to increase in January but refinancing continues to dominate at the bank. Its purchase share is just above 30%, executives said during the call.

B of A originated $11.6 billion in first mortgages in the fourth quarter along with $1.9 billion in home equity loans.

There was a 39% reduction in volume from the third quarter and about a 37% decline in locks. “We continue to reduce our staffing levels” in line with volumes, said B of A CFO Bruce Thompson during the call.

B of A reduced the number of full-time equivalent staff in the fourth quarter of 2013 by 2.3% from fourth-quarter levels led by reductions in consumer real estate services, including home loan sales and fulfillment.

The Charlotte, N.C.-based lender depends solely on retail originations and its wealth management unit. Over half of B of A’s loan officers are now located in its branch offices.

The company is cutting the number of branches in general due to increased online business but it will expand them when it comes to sales, executives say.

Loan production income totaled $333 million in 4Q, up from $142 million in the prior quarter as provisioning for loan repurchase risk fell to $70 million from $323 million in 3Q.

Servicing income continues to decline as B of A has dramatically reduced the size of its MSR portfolio to $810 billion in the fourth quarter from $1.3 trillion in the fourth quarter of 2012.

Overall, B of A reported $848 million in mortgage banking income for the fourth quarter, compared to a loss of $540 in 4Q 2012.

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