Bank of America cut about 5% of staff in its appraisal unit last month as the firm rid itself of delinquent mortgages, said two people with knowledge of the move.
The job reductions at LandSafe, a business with more than 1,000 employees and acquired in the takeover of Countrywide Financial Corp., began Feb. 22, said the people, who requested anonymity because the dismissals were private. Appraisers, who estimate the market value of properties, and regional managers were cut, Tracy Sanderson, a LandSafe senior vice president, told staff in a Feb. 25 email.
"While we have known we were overstaffed since the fall, we did everything we could to delay impacts as long as possible," Sanderson said in the memo obtained by Bloomberg News. "We were hopeful that our volume would return and potentially reduce the number impacted."
About 70% of work done by LandSafe appraisers was related to transactions for soured loans, including the auction of bank-owned properties and short sales in which a borrower's home is sold for less than the amount owed, said one of the people. The bank's expected increase in originations this year isn't enough to offset the drop in work resulting from having fewer delinquent loans to service, the person said.
Bank of America had about 773,000 mortgage customers who were at least two months behind on payments at the end of 2012. That figure will drop to 400,000 distressed borrowers by the end of this year, fueled by the sale of mortgage servicing rights on $306 billion in loans, announced in January, the firm said.
Terry Francisco, a spokesman for Charlotte, N.C.-based Bank of America, confirmed the bank was cutting LandSafe personnel and finding jobs elsewhere in the firm for some of them. The current staff will be able to handle the expected growth in mortgage originations in 2013, he said.
Eliminating workers involved in serving delinquent borrowers is part of CEO Brian Moynihan's plan to pare expenses. Bank of America dismissed 3,000 such employees and 6,000 contractors in the fourth quarter, he said. About $3 billion of quarterly costs tied to legacy asset servicing eventually will fall to $500 million, Moynihan has said.
"There's nothing more important in our company than to get this done as quickly as possible," Moynihan told analysts during a Jan. 17 conference call.
Other competitors have said they would scale back in home lending. JPMorgan Chase & Co., the largest U.S. bank by assets, will cut as many as 15,000 mortgage-related jobs through 2014 as fewer employees are needed to service soured loans, the New York-based company said last month.
Rising interest rates may tamp refinancings, which comprised 71% of originations last year, and new loans for home purchases probably won't make up for the shortfall, according to a Mortgage Bankers Association forecast. Total lending will fall to $1.4 trillion in 2013, a 20% drop from the year earlier, and decline an additional 24% to $1.06 trillion in 2014, the group said.
Remaining LandSafe appraisers may see a "slight increase" in workload because of the adjustment, Sanderson told employees in the February email.
Staff levels are now "at the right level for our expected volume," she said. "Our hope is that we will get through this challenging environment and then start to grow again."
