| CHARLOTTE, North Carolina
CHARLOTTE, North Carolina Bank of America Corp (BAC.N) is putting investment advisers in mortgage offices, an unusual move that shows how far banks will go to "cross-sell" products and services to their customers.
The pilot program, in seven offices in California, is part of the second-largest U.S. bank's effort to target its more profitable "preferred" customers, who have $50,000 to $250,000 in investable assets.
For Bank of America, the pilot program could bring new revenue and aid larger efforts to turn around its disastrous Countrywide Financial mortgage unit, which it acquired in 2008. The bank on Thursday also said it was testing a program that would allow homeowners facing foreclosure to become tenants and lease their homes.
But cross-selling also could show just how different mortgage seekers are from other bank customers. Winning more business from would-be home buyers, who typically focus on landing the best deal on rates and fees, will be a tough task, said Guy Cecala, publisher of Inside Mortgage Finance, which tracks the home loan industry.
"Someone who comes in to talk about a mortgage doesn't really want to talk about something else," he said.
Still, Bank of America's program marks a new approach for an industry that has sought for decades, with minimal success, to sell additional products and services to their customers. The bank's largest mortgage competitors, Wells Fargo & Co (WFC.N) and JPMorgan Chase & Co (JPM.N), don't use that strategy.
Advisers in mortgage offices can prepare financial plans, open investment accounts or refer clients to Merrill Lynch financial advisers for more complex needs, the bank said.
"Many clients come into those mortgage offices," said Dean Athanasia, the bank's head of preferred and small-business banking, who has overseen home loan sales since January. "We want to make sure we can handle a client's needs."
Bank of America is continuing to fix its mortgage unit, which lost $19.5 billion last year, largely due to bad loans inherited from Countrywide.
Since last fall, the bank has been downsizing its mortgage origination business to focus on making loans directly to consumers, instead of using brokers or buying loans from other banks.
All banks are under pressure to find revenue as low interest rates make lending less profitable and new regulations limit fees once earned for overdrafts and debit card transactions, said Miami-based banking consultant Ken Thomas. Placing investment advisers in loan offices could be a way to wring more revenue without raising the cost of overhead, he said.
Mortgage offices are typically less costly because they are in less expensive locations and don't have the same security requirements as bank branches, he said. "It's all about using your brick and mortar more effectively," he said.
Bank of America is also putting investment advisers, small-business bankers and mortgage specialists in about 2,000 of its 5,700 bank branches.
The bank is on track to hire 1,000 small-business bankers by the middle of this year under a plan announced in late 2010, Athanasia said. The bank expects to have more than 1,800 investment advisers, called financial solutions advisers, in branches and call centers by the end of this year, up from about 600 at the beginning of 2011.
The bank's preferred banking program is designed to reward customers who do more business with the bank, Athanasia said. Preferred customers get their own customer service number, better interest rates on certificates of deposit and other perks.
"It's not about how wealthy you are," the Boston-based executive said in an interview at the bank's headquarters in Charlotte, North Carolina. "It's more about what you're holding at Bank of America in terms of assets, products and solutions."
In an investor presentation in November, Bank of America Chief Executive Brian Moynihan said the bank's 8 million preferred customers were nearly 1.5 times as profitable as its 42 million less wealthy retail customers.
Athanasia, who has been in charge of preferred and small-business banking since 2010, added responsibility for home loan sales as part of a management shuffle announced last fall. He is part of a cadre of former FleetBoston Financial executives who have been elevated under Moynihan, an alumnus of FleetBoston.
After buying Countrywide in 2008, Bank of America became the largest U.S. mortgage lender, but it fell to fourth at the end of last year after it stopped buying loans from smaller banks. It had previously stopped making loans through brokers.
At the time of Bank of America's purchase of Countrywide, the California-based lender had a sales force of nearly 15,000 and 1,000 field offices. Now Bank of America's combined mortgage unit, which operates under the Bank of America Home Loans name, has about 2,900 mortgage loan officers stationed in 450 mortgage offices and 1,500 bank branches. Athanasia said the bank plans to hire more loan officers but declined to say how many.
A mortgage office can have as many as 40 loan officers, giving an investment adviser a source of referrals, Athanasia said. The pilot program is in an early stage, and the bank hasn't decided whether to expand it, he said.
(Reporting By Rick Rothacker; Editing by Alwyn Scott and Steve Orlofsky)