BAC reduces staff as delinquent loan count improves
Bove: Mortgages are not profitable for big banks
Bank of America (BAC) admits the number of delinquent loans it services has drastically declined to less than one-third of peak levels. The lender refused to confirm reports of 3,000 jobs pending within its legacy asset servicing group.
However, a statement from the bank suggests the mortgage segment, especially servicing, is still bleeding jobs.
"The number of delinquent mortgage loans we service has decreased to less than one-third of the peak levels. As we continue to resolve the needs of customers with delinquent loans, we are reducing the size of the operations that support these specialized programs," a spokesperson with Bank of America said.
"Additionally, in line with the industry, we are realigning our cost structure in response to lower customer demand for mortgage refinancing. We are working with employees to identify opportunities both inside and outside the bank," the bank said.
"Interest rates have gone up and therefore refinancing has come down, so you do not need as many people. At the same time, foreclosures are going down so you do not need as many people to handle it," noted Dick Bove, vice president at Rafferty Capital Markets.
But this leads to one underlying question, Bove said. Why should they make mortgages?
"Bank of America just lost a case in which they made mortgages. JPMorgan Chase (JPM) is supposedly going to pay $13 billion over mortgage issues, and 6 states have announced their intention to sue nine banks over mortgages. And of course Fannie Mae and Freddie Mac are going after every bank in the country," he added.
Bove believes government interference has made mortgages unprofitable, and at a certain point, lenders really need to think if this is a business segment they want to invest in.