BofA eyes correspondent lending sale
Bank of America (BAC) could be taking bids on its correspondent lending platform. 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. Correspondent lending, although scaled back as banks continue to avoid mortgage risk, remains an option for smaller institutions. The article on the decision of BofA to potentially offload its correspondent lending platform first appeared in The Wall Street Journal. A BofA spokesman would not confirm the decision. He said the bank continues to rely on its retail mortgage business to meet home loan needs for customers. "In addition, we have been able to leverage our platform through correspondent lending to drive incremental earnings," the spokesman said. "This remains our strategy." The spokesman also said the bank routinely evaluates changes to the mortgage business given ongoing regulatory shifts and new capital requirement standards. In May 2010, the North Texas banking firm NexBank launched a correspondent lending group. First Guaranty Mortgage Group did the same this month, and American Home Mortgage Servicing is also looking to expand into the space. Write to Jon Prior. Follow him on Twitter @JonAPrior.