February 24th, 2012 7:58 PM by Robin Bain
B of A Can't Process All Refi Applicationshttp://www.americanbanker.com/issues/177_27/bank-of-america-harp-refinance-applications-1046498-1.htmlBank of America Corp. is limiting the number of refinance applications it accepts over the phone, telling borrowers who do not have an existing relationship with the bank that they may have to wait 60 to 90 days before their loan application can be processed, a B of A spokesman said Wednesday.Like other large banks, the third-largest mortgage lender has been inundated with refinance applications since mid-January. Bank of America is furiously hiring new staff to handle back-office fulfillment for the newest version of the government's Home Affordable Refinance Program, according to spokesman Terry Francisco."We are aggressively building additional capacity to handle both HARP volume and all customer volume," Francisco told American Banker. "Only people who don't have a broad relationship with the bank and happen to call through our telephone channel," are being told to wait.Francisco describes B of A's telephone reservation system as a "relief valve," which tells potential applicants on days when there are high volumes of calls that their applications can not be accepted at that time. The automated system informs callers that they will be contacted in 60 to 90 days, though the actual wait time may be shorter.Existing B of A and Merrill Lynch customers who already have accounts with the bank or people without accounts who walk into a retail branch to apply for a refi have not been affected, Francisco says."On days in which we have a high amount of call volume, we take their name and phone number and call them back," Francisco says, adding that the bank tries to contact potential applicants before 60 days have passed.HARP 2.0, announced by the Obama administration in October, allows underwater borrowers whose loans are owned by Fannie Mae and Freddie Mac to refinance regardless of their loan-to-value ratio. The program is expected to result in a huge refinancing wave since appraisal requirements and lender "representation and warranty" liabilities were waived by the Federal Housing Finance Agency, which oversees Fannie and Freddie.B of A began accepting refinance applications for HARP 2.0 on January 17, which caused "a surge in volume," Francisco says. Only the largest banks, including Wells Fargo & Co. and JPMorgan Chase & Co., have started processing applications. Smaller lenders have to wait until mid-March before accepting applications because Fannie and Freddie are still making technology changes to their automated underwriting systems.The refinance share of mortgage activity rose to 80.5% for the week ended Feb 3, the Mortgage Bankers Association said Wednesday. Moreover, the average interest rate fell to 4.05% last week, the lowest rate in the history of the survey, the MBA says.Last year, B of A laid off 3,500 employees, or roughly 10 % of its workforce, as part of a broad restructuring plan to preserve capital. It also converted many small fulfillment centers to new "customer assistance centers," which were designed to help borrowers who had trouble paying their mortgages obtain a loan modifications.Now the bank is scrambling to get more fulfillment centers up and running, and is asking some of the employees it laid off to come back and help process refinance applications.For example, 500 employees who were doing credit card collections at a Hunt Valley, Md., facility are being retrained to do fulfillment, Francisco says."There still is a strong need for helping people who are behind on their mortgage payments and who need help with modifications. …In situations where we could bring people [employees] back, we are reaching out to build up our fulfillment operations," he says.--------------------------------------------------------------------------------
Bank of America said Thursday that it would no longer sell new mortgages to Fannie Mae, underscoring tensions in a fight between giants of the home loan market over billions in losses in the housing bubble.
The latest move represents a major escalation in a protracted legal battle over how many defaulted mortgages Bank of America will have to buy back from Fannie because the original loans had not conformed to proper underwriting standards, market experts said.
“In mortgage circles, it’s pretty big,” said Guy Cecala, publisher of Inside Mortgage Finance, a trade publication. “It would be fairly extreme for a small or midsized lender to do this, but for a major lender, it’s very extreme.”
As one of the large government-sponsored mortgage finance enterprises, Fannie Mae takes mortgage loans from banks and packages them into securities that can be sold to investors or held on their own balance sheet. Fannie Mae backs about 40 percent of all mortgages in the United States.
Bank of America was Fannie’s third-largest provider last year, according to Inside Mortgage Finance. The bank originated $156.1 billion in mortgages last year, of which $37.7 billion were sold to Fannie, the trade publication said.
Bank of America insisted its customers would not be hurt by the decision, and said it can make up for the loss of Fannie as a backer by turning to Freddie Mac or Ginnie Mae, other government-sponsored mortgage buyers; the private sector; and by deploying its huge balance sheet.
“This decision will not affect the credit available to our customers, and we will rely on other sources of liquidity to continue to ensure we are lending to our customers and supporting the housing market recovery,” said Lawrence Di Rita, a spokesman for Bank of America. He added that the bank would continue to participate in assisting homeowners, including through the federal government’s loan modification program.
Bank of America agreed in January 2011 to buy back $2.5 billion in soured mortgages from Fannie and Freddie, but that deal left the door open to future claims from Fannie. Bank of America also reached an $8.5 billion deal with private investors to cover repurchase claims last June, but that accord is the subject of another legal fight.
Bank of America does not break out how much it has faced in claims from each company, but it has recorded losses on $9.2 billion worth of loans made from 2004 to 2008 that were later acquired by Fannie and Freddie.
Mr. Cecala said that while consumers should not feel the effects of the move in terms of access to credit, the absence of Fannie Mae as a backer could make Bank of America’s mortgage terms and rates less competitive in the future. A spokesman for Fannie Mae declined to comment.
Bank of America revealed the decision in a filing with the Securities and Exchange Commission on Thursday. The direct cause was the dispute over the repurchases, but it comes as Bank of America is reducing its overall size and streamlining its business, and shrinking its mortgage business in particular.
Meanwhile, Fannie and Freddie face questions over what role they will play in the housing market, as policy makers in Washington prepare to overhaul the government’s relationship with the mortgage industry.
Bank of America ranked as the nation’s second-largest originator of home loans for all of 2011, with an 11.6 percent market share, but by the fourth quarter it had slipped into fourth place behind Wells Fargo, JPMorgan Chase and Citigroup, according to Inside Mortgage Finance. Wells, in particular, has been an aggressive competitor, picking up much of the slack in the market and now accounting for one out of every four mortgage originations.
Bank of America, once the nation’s largest bank by assets, has been steadily shrinking its balance sheet, and now ranks second to JPMorgan Chase. Many of its problems stem from the disastrous 2008 decision to buy Countrywide Financial, a subprime mortgage lender that caused Bank of America to record more than $30 billion in losses.
Investors are concerned that Fannie and Freddie, along with private investors, will force Bank of America and other giant mortgage lenders to repurchase tens of billions in mortgages that later defaulted, arguing they were not made with adequate documentation or proof of income, or otherwise failed to conform to proper underwriting standards.
Bank of America and its competitors have argued that many homeowners defaulted because of unemployment, the weak economy and other factors, not errors in the origination process.
Still, repurchase fears weighed on Bank of America shares in particular last year, and at one point Bank of America’s stock fell below $5 a share. Its shares closed at $8.02 on Thursday, up 7 cents.