Bank of America Friday morning reported a fourth quarter loss of $5 billion on its residential finance and insurance unit, citing $4.1 billion in representation and warranty costs tied to buybacks from Fannie Mae and Freddie Mac. In the year ago quarter its mortgage loss was $1 billion.
In 4Q it originated $85 billion of first mortgages, a $10 billion gain from 3Q, but trailed market leader Wells Fargo & Co. by a stunning $43 billion.
For the full-year, the nation's largest servicer of home mortgages, lost $8.9 billion on its residential business, citing $6.8 billion of rep and warranty expenses. (Some of its losses are due to goodwill and impairment charges.)
B of A said that when the goodwill and impairment charges are factored out, the unit lost $3 billion in 4Q. (A few weeks back it announced a $3 billion settlement on buybacks with the GSEs, but the agreement only covers repurchase claims that are currently being disputed and not new claims that might arise.)
But even more telling about its mortgage business – whose core is the old Countrywide Financial Corp. franchise – is the massive revenue losses: $10.6 billion for all of 2010, compared to almost $17 billion the year before.
In early October B of A exited wholesale production, where it ranked fourth nationwide. However, it continues to rank first among all warehouse providers and (as of 3Q at least) was the largest correspondent buyer of mortgages in the U.S. outside of Fannie and Freddie.
The entire bank reported a net loss of $1.2 billion for the quarter.
