Bank of America reported an 11% drop in origination volume in the third quarter, which is better than most of its peers. But its mortgage application pipeline as of Sept. 30 is off 60% from the start of the second quarter.
B of A chief financial officer Bruce Thompson blamed the drop-off in applications to a “significant reduction in market demand particularly in the refinancing space.”
The Charlotte, N.C., banking company originated $22.6 billion in single-family loans in the third quarter, down from $25.3 billion in the prior quarter. Over three-fourths of 3Q originations were refinancings and just 22% were purchase mortgages.
Meanwhile, mortgage banking income fell 47% from the second quarter to $744 million in the third quarter. Thompson noted that gain-on-sale margins fell 60 basis points during the reporting quarter. And servicing income fell $116 million due to B of A’s strategy of selling off large chunks of its servicing portfolio.
Increased
All of B of A’s originations flow through its retail channel and it currently has 30,000 loans in the pipeline. In October, it is receiving about 1,000 applications a day, including 300 purchase applications.
“As we saw demand slow, we reduced head count by more than 1,000 employees toward the end of the quarter,” the CFO said. Thompson expects another decline in fourth-quarter originations.
“We will continue to reduce these staffing levels to be consistent with the lower volumes that we have seen,” he said.
