Bank of America Corp., the second-largest U.S. lender, cut an appraisal unit’s staff by about 5 percent last month as the firm rid itself of overdue mortgages, said two people with knowledge of the move.
The dismissals from LandSafe’s workforce of more than 1,000 employees began Feb. 22, said the people, who requested anonymity because the matter is private. Those affected include appraisers, who estimate the market value of properties, and regional managers, according to a Feb. 25 staff memo from Tracy Sanderson, a LandSafe senior vice president.
“While we have known we were overstaffed since the fall, we did everything we could to delay impacts as long as possible,” Sanderson wrote. “We were hopeful that our volume would return and potentially reduce the number impacted.”
The bank has scaled back in mortgages after being saddled with more than $40 billion in costs tied to defective home loans. Most of those came to Bank of America through its 2008 takeover of Countrywide Financial Corp., whose operations included LandSafe.
Bank of America, once the biggest U.S. home lender, fell to No. 5 in the fourth quarter and has been eclipsed by competitors including Quicken Loans Inc., according to newsletter Inside Mortgage Finance. The field is now dominated by San Francisco-based Wells Fargo & Co., which accounted for almost 1 in 3 U.S. mortgages last year.
About 70 percent of work done by LandSafe appraisers was related to transactions for soured loans, including the auction of bank-owned properties and short sales in which a borrower’s home is sold for less than the amount owed, said one of the people. The bank’s expected increase in originations this year isn’t enough to offset the drop in work resulting from having fewer overdue loans to service, the person said.
Bank of America had about 773,000 mortgage customers who were at least two months behind on payments at the end of 2012. That figure will drop to 400,000 by the end of this year, fueled by the sale of mortgage-servicing rights on $306 billion in loans announced in January, the firm said.
Terry Francisco, a spokesman for Charlotte, North Carolina-based Bank of America, confirmed the company was cutting LandSafe personnel and placing some elsewhere in the firm. The current staff will be able to handle an expected surge in new mortgages in 2013, he said.
“If they do more loans this year than last, I’d be surprised,” said Paul Muolo, managing editor of Bethesda, Maryland-based Inside Mortgage Finance, who predicts Bank of America’s refinancing revenue will drop. “They’re not competing aggressively on rates, they take a long time to close loans, and they’re living off refis that will decline when rates rise.”
Bank of America’s home lending dropped by half last year to $78.7 billion after Moynihan shuttered its correspondent business, which bought mortgages marketed by third-party lenders. Wells Fargo, JPMorgan Chase & Co., Quicken Loans, and U.S. Bancorp originated more than Bank of America’s $22.5 billion in fourth-quarter loans, according to Inside Mortgage Finance.
Eliminating workers who served delinquent borrowers is part of Chief Executive Officer Brian T. Moynihan’s plan to pare expenses. Bank of America dismissed 3,000 such employees and 6,000 contractors in the fourth quarter, he said. About $3 billion of quarterly costs tied to legacy asset servicing eventually will fall to $500 million, Moynihan has said.
“There’s nothing more important in our company than to get this done as quickly as possible,” Moynihan, 53, told analysts during a Jan. 17 conference call.
Some of his biggest competitors have said they will pull back in home lending. JPMorgan, the largest U.S. bank by assets, will cut as many as 15,000 mortgage-related jobs through 2014 as fewer employees are needed to service soured loans, the New York-based company said last month.
Rising interest rates may discourage refinancings, which accounted for 71 percent of originations last year, and new loans for home purchases probably won’t cover the shortfall, according to a Mortgage Bankers Association forecast. Total lending will slide 20 percent to $1.4 trillion in 2013, and 24 percent to $1.06 trillion in 2014, the group said.
Remaining LandSafe appraisers may see a “slight increase” in workload because of the adjustment, Sanderson told employees in the February e-mail.
Staffing is “at the right level for our expected volume,” she wrote. “Our hope is that we will get through this challenging environment and then start to grow again.”