Bank of America Corp., the second-largest U.S. bank, is in negotiations to sell mortgage servicing rights tied to $300 billion in loans, according to Reuters.
Nationstar Mortgage Holdings Inc., Ocwen Financial Corp. and Walter Investment Management Corp. are among firms in talks with Charlotte, North Carolina-based Bank of America, the news service reported today, citing unnamed people.
Bank of America executives have said since at least July 2011 that they will trim mortgage servicing rights and other assets considered risky by regulators. Chief Executive Officer Brian T. Moynihan, seeking to cut costs tied to soured loans, said in November he wanted to shrink the servicing portfolio to about 6 million loans from a peak of about 12 million.
“This is very large, it would be the biggest servicing portfolio transfer we’ve ever seen,” said Kevin Barker, an analyst at Compass Point Research and Trading LLC in Washington. “It’s expensive to service these loans adequately, and so selling them could reduce costs, reduce regulatory scrutiny and remove an overhang for the company.”
Mortgage servicers perform billing and collections on home loans and handle foreclosures when borrowers default. Bank of America had $1.1 trillion in loans serviced for investors at Sept. 30, down from $1.4 trillion at the end of 2011. About half that amount, or $500 billion, could be available for sale, Henry Coffey, an analyst with Sterne Agee & Leach Inc., wrote in a November research note.
Rick Simon, a Bank of America spokesman, said the company doesn’t comment “on market rumors or speculation.” The firm ranks second by assets among U.S. banks and was the biggest home lender before the 2008 financial crisis.
Ocwen Chief Financial Officer John Britti, Walter spokeswoman Whitney Finch and Gordon Runte, a spokesman for Nationstar’s parent, Fortress Investment Group LLC, didn’t immediately reply to messages seeking comment. Dico Akseraylian, a spokesman for PHH Corp., a mortgage servicing company based in Mt. Laurel, New Jersey, declined to comment.
Bank of America is the largest potential seller this year “as it continues to wind down its legacy mortgage servicing division,” Douglas Harter, an analyst in New York with Credit Suisse Holdings USA, wrote in a Dec. 19 note.
“The pipeline for bulk servicing transfers remains robust heading into 2013,” Harter wrote. “Walter and Nationstar have recently sized the near-term opportunity at $500 billion to $600 billion. Longer term, we see the opportunity for transfers to be in the $1 trillion to $2 trillion range” for the industry.
Speculation that Bank of America was selling $300 billion in servicing rights was reported earlier by Inside Mortgage Finance.