Bank of America Corp. Chief Executive Officer Brian T. Moynihan promoted a former FleetBoston Financial Inc. colleague to clean up soured mortgages that fueled losses at the biggest U.S. lender by assets.
Terry Laughlin, 56, will lead the new Legacy Asset Servicing unit for modifying delinquent mortgages, handling foreclosures and resolving investor disputes over faulty loans originated by the company. He joined Bank of America in August, leaving his post as CEO of Pasadena-based OneWest Bank. Laughlin was head of strategy at Fleet, and was on the executive committee with Moynihan.
Bank of America, based in Charlotte, North Carolina, separated the duties of resolving problem mortgages from the tasks of originating new business and servicing loans. As of Dec. 31, the bank faced outstanding claims that it repurchase $10.7 billion in mortgages from investors who said they were duped into buying or backing loans based on overstated home values or borrowers’ incomes.
“This is very positive and in my opinion was long overdue,” said David Lykken, president of Mortgage Banking Solutions, an Austin, Texas-based consulting firm. “There has been a lot going on for one person to manage.”
Barbara Desoer, head of home loans and insurance, will continue to build mortgage lending, serving more than 12 million customers, the company said.
The arrangement provides “greater focus on resolving legacy mortgage issues,” Moynihan, 51, said yesterday in a statement. “We believe this will best serve customers, both those seeking homeownership and those who face mortgage challenges.”
Moynihan reassigned sales people to modify mortgages and brought in workers to aid the effort, crimping results at the bank. The company has hired and trained about 12,000 people for the duties over the past two years, according to the statement.
“Brian has a habit of surrounding himself by people that worked at Fleet,” said Tony Plath, a finance professor at the University of North Carolina at Charlotte. “This shows the bank is beginning to acknowledge that the severity of the defaulted loan operation is more than they thought.”
By September of last year, Moynihan had installed three former FleetBoston colleagues at Bank of America. In addition to Laughlin, he’d recruited hedge-fund manager Mike Lyons as a strategy and planning executive and promoted Lauren Mogensen to deputy general counsel and corporate secretary.
Laughlin’s a good choice for the role, Lykken said.
“Laughlin is a good servicing guy and will likely be much more proactive in putting things in place,” Lykken said. “He should be a refreshing change to the servicing part of the operation.”