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JPMorgan Chase & Co. has surpassed Bank of America Corp. as the largest U.S.-based banking company by both assets and deposits.
October 18 -
One likely result of the consent orders federal regulators recently issued against the largest servicers is that thousands of borrowers will get another shot at a loan modification.
April 23 -
The bank has little choice but to shrink itself through asset sales and layoffs, but the process is slow, demoralizing and no answer to future growth.
October 18 -
Citigroup Inc. and Wells Fargo & Co. have adopted two very different strategies to try to overcome an uncertain economy, increasing regulations and a prolonged slowdown in Wall Street activity — but as their third-quarter results showed on Monday, neither bank has found a foolproof solution.
October 17
Bank of America Corp. once the nation's largest residential mortgage lender, has dropped to third place, defeating the original purpose of its ill-fated takeover of Countrywide Financial Corp.
In the three years since Bank of America bought the massive home lender, it has hemorrhaged billions of dollars on bad home loans — losing executives, lines of business, and its
The housing crisis and its many consequences cast a shadow over most top U.S. banks as they reported their third-quarter results in recent days. But the glut of mortgage losses and related legal liabilities is particularly acute at Bank of America, which is trying to shrink itself through asset sales and layoffs.
"The most important thing to B of A is capital right now. They're in capital preservation mode and one way is to shrink the mortgage business," says Brian Foran, a regional bank analyst at Nomura Securities International.
As part of its retrenchment strategy, Bank of America is exiting wholesale and correspondent lending, which made up nearly half of its total mortgage lending. The bank also stopped lending this month in six low-volume states: Alabama, Alaska, Montana, Nebraska, Wisconsin, and Wyoming.
Chief executive Brian Moynihan has said that B of A is no longer driven by market share but is
The pullback could cause Bank of America's market share to dip into the "single digits" next year, Foran says.
Bank of America's pullback is Wells Fargo's gain — but other, smaller lenders are also filling the void. US Bancorp, Fifth Third Bancorp, BB&T Corp., and SunTrust Banks Inc. have all gained market share, according to Nomura.
Wells' market share in mortgage originations jumped to 29% at the end of the third quarter from 15% at the end of 2007, according to Nomura's research. B of A's total market share for mortgage originations fell to 11% in the third quarter, from a high of 25% in 2007. B of A is now behind JPMorgan Chase & Co., which had a 12% share.
But even those gaining market share are struggling to overcome persistent mortgage-related problems. Banks are struggling with a backlog of foreclosures and continued elevated losses in their mortgage and home equity portfolios. Slower economic growth has crimped demand for new home loans, which is now at the lowest level since 1996, according to a report Wednesday from the Mortgage Bankers Association.
Regulators and state officials have been scrutinizing the largest mortgage servicers over their foreclosure documentation and other practices. At the same time, securities investors and government agencies are demanding that the banks repurchase mortgages they originated and sold before the financial crisis.
In their third-quarter earnings presentations and conference calls, the top four banks complained about yet another round of buyback requests from Fannie Mae and Freddie Mac. B of A said in its earnings presentation that buyback requests "have become increasingly inconsistent with our interpretation of our contractual obligations."
The increase has been attributed to a scathing report last month from the Federal Housing Finance Agency's Office of the Inspector General, which claimed Fannie and Freddie were
"Mortgage is now asbestos for banks," Foran says. "Banks thought that they would be done with putbacks by this year but now all of a sudden banks are fuming that putbacks are a never-ending issue."
He estimated that buybacks, litigation and foreclosures are costing the industry $10 billion per quarter. That estimate does not include one-time charges like the $8 billion charge that B of A took in the second quarter to settle buyback requests from large bondholders.
Banks also face a new wave of repurchases in coming quarters from billions in delinquent loans insured by the Federal Housing Administration. Tim Sloan, Wells' chief financial officer, told analysts that he expected the FHA would "honor their guarantee" on the $16.5 billion in delinquent FHA loans held by Wells, but analysts are increasingly skeptical that FHA will pay out given its dwindling insurance fund.
Citi said in its earnings presentation that it has dramatically cut its FHA origination volume and increased its repurchase reserves.
According to third-quarter earnings reports, Wells' revenue from home mortgage originations jumped 39% between June 30 and Sept. 30 to $89 billion. JPMorgan Chase's mortgage revenue rose 10% over the same period to $36.8 billion while B of A's revenue fell 18% to $33 billion. Citigroup's mortgage lending fell 9% in the same period to $17 billion.
