August 31, 2011 / 5:35 AM / 8 years ago

BofA to exit correspondent mortgage business

A sign for a Bank of America office is pictured in Burbank, California August 19, 2011. REUTERS/Fred Prouser

CHARLOTTE, North Carolina (Reuters) - Bank of America Corp (BAC.N) is looking to sell its correspondent mortgage business, continuing a push to shed parts of its home loans division, a company spokesman said on Wednesday.

The largest U.S. bank by assets decided to exit the correspondent channel, which employs more than 1,000 people, because it no longer fits with the long-term strategy for its mortgage unit, Bank of America spokesman Dan Frahm said.

“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 potential sale is also the latest in the bank’s broader move to shed assets as it looks to raise capital to meet new industry standards, and potentially absorb billions in home loan-related losses.

Within its home loans business, Bank of America has eliminated its reverse mortgage business and its wholesale mortgage operation, along with selling Balboa Insurance — which provides lenders insurance on foreclosures.

Correspondents fund loans and sell them to larger lenders.

Banks typically use correspondent lending to generate more mortgages to, in turn, sell to investors and service them.

Loans purchased from correspondents accounted for 47 percent of Bank of America’s mortgage originations, or $27.4 billion, in the first quarter of 2011, the Wall Street Journal said citing Inside Mortgage Finance.

The biggest U.S. bank plans to cut 3,500 jobs in the next few weeks, its Chief Executive Brian Moynihan had said in a memo to staff on August 18, as it tries to come to grips with $1 trillion of problem home mortgages.

Reporting by Joe Rauch and Sakthi Prasad in Bangalore; Editing by Vinu Pilakkott and Gunna Dickson

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