(Corrects number of total layoffs to 4,000 from 4,200 and
layoffs in the servicing division to 2,800 from 3,000)
By Peter Rudegeair
Oct 24 Bank of America Corp said on
Thursday that it was cutting up to 4,000 mortgage jobs as fewer
borrowers refinance, and fewer home loans go bad.
The layoffs are the latest round of job cuts at major banks
as rising mortgage rates cut into demand for refinancing home
loans. Wells Fargo & Co, JPMorgan Chase & Co and
Citigroup Inc. have announced thousands of layoffs among
them in recent months.
At Bank of America, the third largest U.S. mortgage lender,
about 1,200 employees were notified this week that they would be
terminated. Most were full-time workers in the division that
processes new mortgages, a spokesman said.
Before the end of the year, the bank is looking to cut
another 2,800 jobs in the division that collects payments from
borrowers who are behind, a spokesperson added. Most of the
layoffs in that division will affect contractors.
Five years after the financial crisis, many of the loans
that should never have been made have already gone bad, leaving
banks with fewer troubled loans to manage.
For Bank of America, mortgage loans that were delinquent by
more than 60 days fell by 94,000 to 398,000 in the third
quarter. The bank expects a further decline to below 375,000 by
the end of 2013.
Mortgage lending volume at Bank of America was down 11
percent in the third quarter from the second quarter. The number
of applications the bank had received but not yet processed was
down 60 percent in the end of September from the end of June.
The bank expects to make fewer home loans in the fourth
quarter and will look to cut more mortgage jobs, Chief Executive
Officer Brian Moynihan said during an Oct. 16 quarterly
conference call with analysts.
The job cuts at the bank follow another round of layoffs--
in the third quarter, the second-largest U.S. bank eliminated
more than 9,000 full-time positions, or 3.6 percent of its total
Finance chief Bruce Thompson said on the Oct. 16 call that
the reductions were concentrated in the unit that collects
payments on home loans, the unit that makes new home loans, and
in many of the bank's branches.
A majority of the latest cuts will affect employees based in
California, Texas and Florida.
News of the layoffs was first reported by the Wall Street
HIGHER RATES SLOW REFINANCING
Rising interest rates have weighed on mortgage refinancing
at banks since the spring. The average interest rate on a prime
30-year mortgage stood at 4.39 percent in the week that ended
Friday, according to the Mortgage Bankers Association (MBA),
down from a high of 4.80 percent in September but above the 3.59
percent rate in early May.
With rates having recently come down from their September
highs, demand for refinancing has increased by one third, and
overall mortgage applications are up by 18 percent, according to
MBA data. But even with that pick-up, applications are down by
52 percent from their level in early May.
With these declines, Wells Fargo & Co, the largest
U.S. mortgage lender, said on Oct. 17 that it was cutting 925
mortgage jobs. That is in addition to the 5,300
Wells Fargo mortgage employees who were notified that they would
be laid off in the third quarter.
Bank of America was the third-largest U.S. mortgage lender
in the first six months of 2013, making 5.2 percent of all U.S.
home loans, following JPMorgan Chase, according to Inside
Mortgage Finance, an industry publication.
(Reporting by Peter Rudegeair; Editing by James Dalgleish, Lisa
Von Ahn and Bob Burgdorfer)