Bank of America Shuts Its Private-Label Outsource Unit
Bank of America - which has experienced a series of ups and downs in mortgages over the past five years - is closing its private-label outsourcing unit, Financial Services Solutions.
The decision to shut FSS comes just 20 months after BoA launched the business during the height of the refinancing boom.
FSS president Greg Sullins told Mortgage Servicing News that "our first task will be to shut down and take care of our one client."
Although BoA would not disclose the name of the client, sources confirmed it is IndyMac Bancorp of Pasadena, Calif., a top 20 mortgage lender. (A spokeswoman for IndyMac said FSS' decline will have no effect whatsoever on IndyMac's ability to originate and fund mortgages. "We can handle it internally," she said. "The past few months they were doing very little for us.")
At its busiest, FSS employed about 400 with offices in California, Kentucky, New York and North Carolina. Today the unit, jointly owned by title insurance giant Fidelity National Financial, employs about 150.
Its executive team is headquartered in Charlotte but it has about 100 employees in Kentucky. It hopes to totally liquidate the unit by May.
The fact that FSS had just one client remaining after 20 months speaks volumes about the company's troubles.
A spokesman for the bank said, "The industry did not take advantage of what FSS had to offer. Looking back, many potential clients were uncomfortable with having Bank of America being a competitor and an owner in this joint venture."
Mr. Sullins said Bank of America has made a decision "to focus on its core business," noting that the decline in conventional residential production was a key factor in the move. (Loan volumes continue to be healthy in the nonconforming market but BoA exited that business several years ago.)
Last year BoA shut down Framework Inc., Tarrytown, N.Y., a mortgage technology vendor that it paid about $50 million for just a year earlier. About four years ago BoA exited the correspondent channel, a move that caused its loan production to plummet.
Under Kevin Shannon, its then-president of consumer real estate, it tried to beef up its reach in retail and wholesale lending. (Mr. Shannon departed last year.)
Late last decade, a few years before Mr. Shannon took over, the bank quietly liquidated its two subprime units, NationsCredit and EquiCredit, missing out on the explosive growth in the nonconforming sector.
According to sources, at one point it had been talking to Countrywide Home Loans, Pasadena, about outsourcing most of its mortgage production and servicing to that company. (The deal never came to fruition.)
Financial Services Solutions' goal was to support lenders by providing them with a full range of private-label solutions - from loan application though closing and account set up.
Key components of its platform included technology from RealEC (owned by Fidelity National) and LendWare, software operated by Framework.
On the launch of FSS, BoA bragged that the new company "creates the industry's first, robust, integrated, end-to-end sales, fulfillment and servicing platform."
But by playing in the private-label space, FSS was up against such industry stalwarts as PHH Mortgage, Countrywide and Nexstar Financial.
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