Bank of America Corp (BoA, BAC.N) is planning to divest its correspondent mortgage business, selling segments of its home loans division, said a company spokesperson on 31 August.
According to Dan Frahm, the largest bank in the US by assets has decided to leave the correspondent channel as it is no longer suitable for its mortgage unit’s long-term strategy. The decision affects more than 1,000 employees.
"We intend to sell the correspondent mortgage lending division or, if a suitable deal is not identified, we will consider other options," said Frahm.
The impending sale is one of the bank’s latest moves to streamline its assets, as it aims to raise capital to meet new industry standards and possibly absorb billions in home loan-related losses.
In its home loans division, BoA has removed its wholesale mortgage operation and reverse mortgage business, as well as sold Balboa Insurance Company, which provides foreclosure insurance for lenders.
Banks usually use correspondent lending to create more mortgages to sell to investors and manage them.
According to an Inside Mortgage Finance report, loans bought from correspondents made up 47 percent of the BoA’s mortgage originations (US$27.4 billion) in Q1 2011.
The bank plans to cut 3,500 jobs within the next few weeks, said Chief Executive Brian Moynihan in a memo to its staff dated 18 August, as it tries to deal with $1 trillion of problem mortgages.
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