BofA Downsizes Mortgage Business Staff

Bank Of AmericaBy Bank of America (Own work by the original uploader) [Public domain], via Wikimedia Commons

According to a Bloomberg report, Bank of America Corp. (BAC) has cut 450 mortgage jobs. This is part of BofA’s ongoing strategy to reduce its workforce in the mortgage banking division.

Employees in BofA’s West Coast offices were the target of retrenchment this time. The jobs of the aforesaid number of employees were terminated with immediate effect. These employees will however, receive two months’ pay and will be eligible for severance pay in the future. Notably, the company is hiring in its other wings, thereby giving a chance to these employees to find jobs in the same.

BofA has been facing lower demand for new loans as rising interest rates have made loans costlier. Further, with gradual improvement in the economic scenario, the prices of real estate properties are likely to increase, which will make it costlier for investors to invest in a property with a huge loan burden.

Hence, new mortgage loans and refinancing activities are facing a setback. In 2013, BofA’s mortgage banking revenues declined nearly 18% year over year.

Further, as per the latest data available from the Mortgage Bankers Association (MBA), mortgage applications have remained sluggish for the week ended Feb 7. The Market Composite Index, which measures total loan application volume, fell 2%. Also, the Refinance index dipped 0.2% and the Purchase Index declined 5%.

Going forward, we believe that the loan demand could be lower than what is being expected. Hence, large mortgage lenders such as BofA,JPMorgan Chase & Co. (JPM), Wells Fargo & Company (WFC) and Citigroup Inc. (C) are striving to minimize losses by adopting stringent cost-cutting measures.

Currently, BofA carries a Zacks Rank #3 (Hold).

BANK OF AMER CP (BAC): Free Stock Analysis Report

CITIGROUP INC (C): Free Stock Analysis Report

JPMORGAN CHASE (JPM): Free Stock Analysis Report

WELLS FARGO-NEW (WFC): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research



About the Author

Zacks
At the center of everything we do is a strong commitment to independent research and sharing its profitable discoveries with investors. This dedication to giving investors a trading advantage led to the creation of our proven Zacks Rank stock-rating system. Since 1986 it has nearly tripled the S&P 500 with an average gain of +26% per year. These returns cover a period from 1986-2011 and were audited and attested by Baker Tilly, an independent accounting firm.