Now that Bank of America has signaled its intention to exit the correspondent lending arena, speculation is centering on the next mortgage shoe to drop at the company: warehouse credit and whether it might have a successor of sorts.
Nationstar Mortgage, Lewisville, Texas, at press time was continuing talks to buy Bank of America's correspondent lending division, or at least parts of it, according to industry advisors who claim to have knowledge of the situation.
Nationstar officials at the time of this writing had declined to discuss the matter.
In August B of A announced that it would exit the correspondent mortgage space, where it ranks second nationwide.
The bank is currently marketing the correspondent group whose business is intertwined with its warehouse lending division. Among warehouse financers, B of A ranks first nationwide with about $10 billion of commitments, according to figures compiled by this publication and the Quarterly Data Report.
Nationstar ranks 28th among originators with a market share of 0.31%. It also services roughly $67 billion of residential loans.
Fortress is a publicly traded investment fund whose CEO is Daniel Mudd, the former CEO of Fannie Mae.
Now that Bank of America has signaled its intention to exit the correspondent lending arena, speculation is centering on the next mortgage shoe to drop at the company: warehouse credit.
When the bank confirmed that it would sell or wind down its third-party platform, it maintained that its warehouse business was safe—and then did an about-face.
B of A spokesman Dan Frahm told this publication that the decision to stay in warehouse lending is dependent “to some extent on the interests of a potential buyer for our correspondent business. Bottom line, the final decision has not been made and cannot until we are further in discussions.”
A handful of warehouse executives interviewed by this publication believe the bank's exit from warehouse finance is inevitable—and at least two of these officials said they've placed calls to B of A's customer base to see if they need backup lines.
According to figures compiled by this newspaper, at midyear B of A was the nation's largest warehouse provider with roughly $12 billion in commitments to nonbanks.
The bank, historically, has declined to provide any information about its warehouse business but it's been common knowledge for years that it exists solely to support the correspondent unit.
Back in June when B of A warehouse executive Paul Szymanski departed for the much smaller PennyMac Mortgage Acceptance Co., it was considered a foregone conclusion that its warehouse business might be on the ropes.
“When Paul left the company the writing was on the wall,” said one warehouse official, requesting anonymity. “There's no way he would've left if they were committed to the business.”
As for the correspondent channel, if B of A cannot find a buyer it will leave a huge hole—but one that other end investors would be happy to fill.
The bank ranks second among correspondent investors with a market share of 19%. Wells Fargo is first with a 21% share.
It's anticipated that a handful of midsized correspondent players—including CitiMortgage, PHH Mortgage and U.S. Bank Home Mortgage—might quickly fill the void once B of A departs.
Meanwhile, it remains to be seen whether the bank can actually sell its correspondent division. The likely buyer would be another depository. But as one former warehouse executive put it: “Why buy it when you can just hire all their people instead?”
In other B of A news, Bank of America is hiring financial advisors, including mortgage specialists, as it expands its network of high tech “specialty stores” for customers with $50,000 to $250,000 in “investable assets.” A spokesperson for B of A told this publication the number of mortgage specialists involved in the expansion was not immediately available. The spokesperson said the broader goal is to hire an additional 500 Merrill Edge financial solutions advisors in banking centers nationwide and operate about 600 call centers with 24/7 access by yearend.
B of A has hired 40 Merrill Edge Financial Solutions Advisors in the mid-Atlantic region, including Washington, D.C., Baltimore and Philadelphia. The advisors offer specialized banking and investment guidance and services onsite or on video.
