Bank of America Exits Wholesale Lending. Big Deal?
The headline says it all. If you're looking for confirmation. HERE is the BoA presser. Below is the text of the release.
--------------------------------------------------------------------------
Strategic Move Will Build Upon Leadership Positions in Retail, Correspondent and Warehouse Lending
Bank of America Home Loans will exit the first mortgage wholesale channel to focus more operational resources toward fulfillment capacity for its leading direct-to-consumer retail channel, helping existing and new customers obtain mortgage financing. Bank of America will also devote additional resources toward enhancing its leadership positions in correspondent and warehouse lending. The exit will be completed following an orderly transition of loans currently in process.
"By exiting the first mortgage wholesale channel, we can redirect critical operational resources to further enhance our capabilities in direct-to-consumer channels," said Barbara Desoer, president of Bank of America Home Loans. "This is an investment in strengthening our competitive position by delivering on the services our mortgage customers expect from Bank of America."
Bank of America holds a prominent share in retail mortgage originations, with 22 percent of the retail market in 2009, according to Inside Mortgage Finance (IMF). Bank of America's share of the first mortgage wholesale channel was 8 percent in 2009. Conversely, Bank of America was the leading participant in the correspondent mortgage channel, with nearly 26 percent market share, according to IMF.
"Bank of America remains committed to purchasing and financing loans from Correspondent Lending clients, including those approved to originate loans from mortgage brokers," said Doug Jones, president of Bank of America Institutional Mortgage Services. "We intend to build upon our leadership position in that market to provide enhanced liquidity to the smaller financial institutions and independent mortgage companies that supply mortgages as our correspondent clients."
Associates impacted by the exit from the first mortgage wholesale channel will have the opportunity for redeployment to other Bank of America Home Loans units, including direct-to-consumer operational units that are helping Bank of America customers take advantage of historically low rates to purchase new homes or refinance existing homes. Associates will also have the opportunity to transfer to other Bank of America Home Loans units, including Correspondent and Warehouse Lending, Retail Sales and teams serving the needs of distressed borrowers.
Bank of America will work closely with its first mortgage wholesale clients to ensure that loans currently in the pipeline are fulfilled and processed for consumers.
--------------------------------------------------------------------------
I highlighted the portion of the release that I found to be most important. BoA still buys loans through the correspondent conduit (UW delegation is important!). The wholesale lending market is competitive with or without BofA in it. Were they offering any niche UW agency products (or exceptions/variances)? Nope. Is anyone offering credit exceptions. Nope.
Now the broader implications. One could speculate on the broader implications.......
One has to wonder if this move is related to pending originator compensation reform (overage caps coming. spread caps too). Or maybe it was a simple risk management decision? Or maybe it was a combination of both. The major lenders/mass aggregators are highly susceptible to repurchase risk (variances are found here. via repo waivers), plus the FHA just raised the stakes with new third party origination risk retention regs.
Either way...BoA is following the path of JP Morgan Chase...no more wholesale lending. This leaves mortgage brokers to wonder if more wholesale lenders will follow in the footsteps of BoA and JP.
Brokers always seem to survive.