How much does Bank of America loathe the mortgage business? Let us count the ways: it kills its wholesale and correspondent units, trims its warehouse group down to nothing, allows its departing high-performance loan officers to leave and then starts lopping off huge chunks of its servicing portfolio.
That's quite a list and it doesn't even take into account its recent decision to “suspend” cash-out refinancings while telling its current customers that if they want to refi their B of A loan please leave your name and address and someone will get back to you—in 90 days!
Is this any way to run a mortgage business? I don't blame Barbara Desoer for retiring. (From what I understand the bank offers excellent retirement and “departure” packages.)
But all this—as readers well know—is water under the bridge. Back in 2008 B of A bought a Trojan horse of bad news called Countrywide Financial Corp., and the rest is an ugly history littered with multibillion dollar losses tied to hundreds of thousands of bad subprime, alt-A, home equity and payment option ARMs.
Today, even though lenders are funding the highest-quality loans ever, B of A (more or less) wants out of the business—not totally, mind you, but pretty darn close.
At its peak, B of A serviced almost $2.2 trillion of home mortgages (June 2010), amassing a servicing market share of almost 23%. At the end of the third quarter of 2011 that number had fallen to $1.9 trillion, which means roughly $300 billion of MSRs have gone out the back door at B of A—either through sales in the secondary market or run-off from refinancings.
With B of A basically exiting the refi business—which nationwide accounts for 70% of loan production—it doesn't take a genius to figure out that its servicing portfolio will run off even quicker.
But the big question for B of A watchers is how fast it might be able to peddle large blocks of MSRs. This past fall—in an ultra secret hush-hush deal—the bank sold $74 billion of MSRs to Fannie Mae, which refused to comment on the matter until finally admitting in an SEC filing that it had bought the portfolio.
B of A also unloaded a $50 billion chunk of mostly Freddie Mac MSRs to Nationstar Mortgage in another transaction that has been kept quiet.
Currently, the bank is peddling a $35 billion MSR package and hopes to have a buyer by the time you read this.
From what I'm told, the bank has plans to unload large batches of MSRs on a monthly or quarterly basis. Its lucky investment banker on these sales is Phoenix Capital of Denver, which stands to make some nice commissions along the way. (The press-shy Phoenix declined to confirm or deny that it has the contract, though the entire servicing industry knows that it does.)
Late last week rumors were floating around that a large hedge fund might wind up buying a $150 billion chunk of B of A MSRs. In short, the whole house is for sale—within reason.
Of course, anyone familiar with mortgage finance and MSRs might look at what the bank is doing and ask this: Is it really such a smart idea to sell so much product in a down market? The answer to that question is no, but why should this surprise anyone by now?
B of A is hell bent on getting out of residential finance and servicing because, well, it screwed up big time with Countrywide. So, if you want in, give the bank a call. They're making deals—and it's a buyer's market.
