Bank of America may wind down correspondent lending if sale fails
Bank of America (BAC) said Wednesday it will officially exit the correspondent mortgage lending business. The nation's largest bank said the preferred option would be an out-and-out sale of the platform, and outlined options should this fail to happen. Either way, the bank wants out. Rumors brewed in previous weeks of the move, and sources hinted to HousingWire of a deal earlier this week about the exit. On Wednesday, BofA settled the speculation and issued a statement confirming the reports. "As part of our ongoing activities to align the Bank of America Home Loans business to the bank’s customer-driven strategy, we have made the decision to exit the correspondent mortgage lending division. We intend to sell the correspondent mortgage lending division or, if a suitable deal is not identified, we will consider other options, including winding down the correspondent lending business in an orderly manner," the bank said. BofA added it would continue operating the correspondent business as usual until a deal or a decision is reached. Correspondent lenders provide a mortgage to a borrower and then sell the loan to another institution, typically through a warehouse line of credit. They underwrite and approve their own loans, which gives them as much freedom as risk. The investor can remove the warehouse line and even force a correspondent lender to repurchase bad loans. In the past year, BofA has been trimming down its mortgage operations business to a core. It exited the wholesale lending and reverse mortgage businesses and sold its Balboa insurance segment. The bank is now in a sell-off mode to raise capital. It received a $5 billion injection from a massive stock sell to Warren Buffett and unloaded half of its holdings in China Construction Bank Corp. Now, it is looking to raise even more cash from its correspondent lending platform sell. "We are strengthening our focus on serving the needs of the bank’s 58 million households and supporting growth across the franchise," BofA said. Write to Jon Prior. Follow him on Twitter @JonAPrior.