The government's bold moves to lower mortgage rates and a spike in applications in recent weeks have Bank of America Corp. thinking seriously about bringing in reinforcements.
The company, which became the top originator with its July acquisition of Countrywide Financial Corp., said it may soon need to recruit back-office workers to process an influx of mortgage requests. However, it said it has enough loan officers to make the sales.
"We're undergoing a pretty aggressive scenario-forecasting process that would range from the same market that we thought was going to happen to a market that would be very similar" to the refinance waves of 2003 and 2004, said Matthew Vernon, the enterprise sales executive for B of A's mortgage, home equity, and insurance businesses. "It could be a very sizable market versus what we thought even a few short weeks before."
He spoke to American Banker on Tuesday — the day the Federal Open Market Committee cut its target for the federal funds rate to between zero and 25 basis points from 75 basis points.
The cut "is adding fuel to what has been since, say, … Thanksgiving, increased activity around refinance based around the rate environment," Mr. Vernon said.
Rates dropped sharply last month on word of the Federal Reserve Board's plan to buy agency debt and mortgage-backed securities. James Lockhart, the director of the Federal Housing Finance Agency, said last week that mortgage rates could fall below 4.5%, even without a program the Treasury Department is considering to lower them to that level, if spreads continue to contract.
Last week, B of A said that after it buys Merrill Lynch & Co. Inc. on Jan. 1 it expects to cut 30,000 to 35,000 jobs.
But in mortgages, B of A wants to make sure "that we've got enough people to capture the demand through all of the scenarios that we're talking about," Mr. Vernon said.
The company would not say how many mortgage salespeople or back-office workers it has or how many it thinks it might need. In March, Countrywide said its origination work force had shrunk 30% from a year earlier, to 22,115 people. (On June 26, a week before it closed on the purchase of Countrywide, B of A said it planned to cut 7,500 jobs over two years.)
"We don't foresee on the sales side that we have to do a tremendous amount [of hiring], with the exception of, say, phone channels," Mr. Vernon said. "But it's behind-the-scenes fulfillment, underwriting, closing capacity that we have to build out aggressively" if the market rebounds.
B of A has a unique sales capacity "because of the size and scale and scope of the organization and the infrastructure that we already have in place" after acquiring Countrywide, he said. But a big increase in volume could test his company's ability to process.
"It comes down to timing," Mr. Vernon said. "It depends on … when that all occurs and our ability to ramp and scale up our fulfillment and back-office operations. You could have an interim period where … we have capacity challenges, but we have many different plays in our playbook to mitigate those."
Jason Marx, a vice president at the consulting firm Wolters Kluwer Financial Services, said some lenders are better positioned than others for a refi wave, depending on how extensively their processes are automated. "Of the customers we deal with, the large national players are certainly capable of handling that … and have made the investments in automation," he said.
In May 2007, seven months before B of A agreed to buy Countrywide, the Charlotte company introduced No-Fee Mortgage Plus, which dispensed with customary charges for things like appraisal, title, and flood determination. Mr. Vernon said the offering is "still one of our primary purchase products in the legacy Bank of America environment."
It is not currently offered through the Countrywide platform because of technology constraints, but B of A plans to offer a single product with a similar design across the organization in late April, Mr. Vernon said.
"We've done a lot of work in the transition to align our products," he said. "But there were certain products the technology didn't allow us to align."