BofA Tumbles to 5.6% Share of Mortgages as Wells Fargo Dominates

Bank of America Corp. lost about three-quarters of its market share in U.S. home mortgages since 2007 as the firm grappled with defective loans, while Wells Fargo & Co. (WFC)’s presence almost doubled, FBR Capital Markets said.

Bank of America saw its share of originations drop to 5.6 percent in the fourth quarter from 10 percent in 2011’s third quarter and 24.7 percent in 2007 as it exited correspondent lending, Paul Miller of FBR said today in a research note. Miller’s calculations combined the total for Bank of America and subprime lender Countrywide Financial Corp., the biggest mortgage company at the time, which was acquired in 2008.

Chief Executive Officer Brian T. Moynihan, 52, is retreating from mortgages while his company makes amends for shoddy loans created by Countrywide and cuts back on riskier holdings. The second-biggest U.S. lender by assets posted a $1.5 billion loss in its real estate unit in the fourth quarter, after ceding No. 1 rankings for new mortgages and servicing existing loans to Wells Fargo.

“Capacity to originate loans is being ripped out, and the structure of the industry remains uncertain,” Miller said in the note. Wells Fargo and Cincinnati’s Fifth Third Bancorp (FITB) “are best positioned to take advantage of dislocation in the mortgage market.”

Potential Winners

Wells Fargo, the No. 4 U.S. bank by assets, rose to 30 percent of the market from 15 percent in 2007, according to FBR. Apart from the San Francisco-based bank, smaller firms will increase loans the fastest, including Minneapolis-based U.S. Bancorp (USB), BB&T Corp. (BBT) of Winston-Salem, North Carolina and PHH Corp. (PHH), the mortgage processor based in Mount Laurel, New Jersey, Miller said.

The origination market has shrunk from almost $3 trillion in 2006 to $1.3 trillion last year, he said.

JPMorgan Chase & Co. (JPM), the biggest U.S. bank, and No. 3 Citigroup Inc. (C) both lost almost a third of their market share since 2007, according to Miller, with JPMorgan at 10.4 percent and Citigroup at 5.7 percent at year-end. Both are based in New York. The five biggest home lenders set aside more than $70 billion for costs from faulty mortgage and foreclosures.

To contact the reporter on this story: Hugh Son in New York at hson1@bloomberg.net

To contact the editor responsible for this story: Rick Green at rgreen18@bloomberg.net