Ken Lewis, CEO of Bank of America, the nation’s second-largest bank, announced on Friday that it will shut down its consumer real estate division and its wholesale lending unit, which offers residential mortgages through over 7,000 independent brokers, at the end of the year.
The move signals a commitment to focus on direct-to-consumer lending through its banking centers and loan officers, said Floyd Robinson, Bank of America’s president of consumer real estate and insurance services. “While we are extremely proud of our strong track record in the wholesale business, we believe our long-term opportunity lies in maximizing our more competitive retail channels.”
In May, Bank of America introduced its national “no-fee” mortgage program, which eliminates the buyer, lender and third-party fees that can add several hundred to a few thousand dollars to the cost of buying a home. This loan product has created more than $50 billion in application volume in the past six months and has enabled Bank of America to “gain critical market share”, according to Robinson.
The numbers seem to bear him out. For the 3rd quarter of this year, the nation’s largest retail saw an increase of 27 percent in first mortgages funded over the 3rd quarter of 2006.
Despite the dramatic up tick in mortgage originations, Lewis was said to have been “pissed” at the disappointing drop in revenues for the quarter ending Sept. 30 and is pushing to double BofA’s current 5 percent market share of direct-to-consumer home loans in the next three years by focusing on the prime mortgage market, which are those loans offered only to borrowers with stellar credit scores, usually a FICO of 740 and above.
So what does this mean? Well, the lives of more than a few San Diego mortgage brokers just got a bit more difficult and 3,000 BofA jobs will be cut. It is all good for the consumer, though. Less fees and a lender aggressively looking for business should mean lower rates for the well qualified San Diego home buyer.
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