Depending on whose numbers you use, Bank of America Corp.'s share of the residential mortgage market has either stagnated or dropped over the past five years while other top lenders' shares grew dramatically.
"We're really not happy about that, and our intent would be to have a market share that's more reflective of the size of our company," said Floyd Robinson, who became the president of B of A's consumer real estate division in September.
To accomplish that goal, Mr. Robinson has been making some big changes.
He has shelved the mortgage technology concept championed by his predecessor. He has persuaded the parent company to give his division its own balance sheet. He has added a single first-mortgage chief.
And in a departure from the company's strategy of recent years, Mr. Robinson plans to increase B of A's originations of less-than-prime products and other nonconforming loans.
On Tuesday, B of A told the employees of Financial ServiceSolutions LLC, its mortgage production outsourcing joint venture with Fidelity National Financial Inc. and Accenture Ltd., that it would be shut down.
In an interview, Mr. Robinson said, "It's become clear to me that what I'd like to do, and I think what the company certainly would support us in doing, is to focus on the growth opportunities that we have in front of us as a part of Bank of America."
The country's third-largest bank by assets ($1.1 trillion) was only the seventh-largest mortgage originator as of Sept. 30, according to National Mortgage News. But Mr. Robinson said his plans will "really make this a different-looking real estate business."
For the past few years B of A has focused on making home loans to prime borrowers. In Mr. Robinson's view, the limited product focus creates a scalability problem, and leaves opportunities untapped. When the refinancing boom fizzled, the Charlotte company's volume dropped more than the industry's because it had fewer offerings for those borrowers still in the market, including its own retail banking customers.
Mr. Robinson said he wants B of A to write more jumbo loans, more FHA and VA loans, and more Alternative-A loans. "In many ways we have just scratched the surface in certain areas of this industry that we ought to participate in," he said.
Subprime mortgages remain off-limits, Mr. Robinson said. But what that means is hard to say. One company's Alt-A can be another company's subprime.
Mr. Robinson said he defined Alt-A as borrowers with credit scores between 620 and 680. But he quickly acknowledged that B of A's heavier Alt-A emphasis would also include reduced-documentation loans, and that any characterization of a loan depends on investor definitions.
Bank of America will be careful in this niche, Mr. Robinson said.
"We take reputational risk here very, very seriously," he said. B of A will try to "operate in the consumers' best interest in all cases, and be prudent in the methodologies we employ in lending."
Much of the new product will be sold on the secondary market, Mr. Robinson said. But he added that B of A agreed to give the first mortgage business a balance sheet in December so it could hold unusual loans, as well as to provide interest income to ease volatility.
Another disappointment for B of A has been in cross-selling mortgages. Mr. Robinson said 96% of its 33 million customers say they know Bank of America is in the mortgage business and 88% say will consider it as a provider, but only 6% get their mortgages from the company.
It has been much more successful cross-selling home equity products. Of those B of A customers who have a second mortgage or a line of credit, 25% got it from B of A - even though it was late in introducing a "piggyback" credit line that consumers can get with their first mortgage, Mr. Robinson said. Still, B of A's customers have borrowed $1.5 billion from other home equity lenders.
The employees in B of A's banking centers need to better understand - and help overcome - borrowers' individual "issues and barriers" to getting loans, which takes more training and products now than in a refi market, Mr. Robinson said.
He said his priorities also include strengthening B of A's relationships with builders and real estate agents, expanding its relocation business and rewarding bank customers for getting their mortgages from it.
In December, Eric Telljohann, another veteran of the dealer financial services unit, was put in charge of first mortgage operations, reporting to Mr. Robinson. David Rupp, the manager of home equity who had reported to an intermediary, became a direct report.
B of A is one of several big companies that have recently shaken up the management of their mortgage units. Others include Washington Mutual Inc., JPMorgan Chase & Co., and, most recently, ABN Amro. (See story on this page.)
Over its short life Financial ServiceSolutions had mostly foundered in sales efforts, a victim of having a competitor of potential clients as a parent. By the time employees in Louisville were told of the shutdown yesterday, IndyMac Bancorp. Inc. was the sole remaining customer. (An IndyMac spokeswoman said last month that its use of the outsourcer was limited.) The venture's doors will close by May, a B of A spokesman said.
The outsourcer was part of the "shared technology" vision espoused by Kevin Shannon, Mr. Floyd's predecessor and now B of A's enterprise credit risk executive.
He thought big mortgage lenders spent far too much money and effort on systems that soon became outdated. In speeches and interviews, Mr. Shannon argued that lenders should create technology jointly. He tried to put B of A in the center of it.
On Mr. Shannon's watch B of A bought Framework Inc., a Tarrytown, N.Y., mortgage technology vendor, in early 2003, reportedly for $50 million.
B of A shut down Framework last year. Last week it convinced its partners in Financial ServiceSolutions that it should be closed, the B of A spokesman said.
Mr. Robinson said he thought Mr. Shannon's ideas made sense, but "we just didn't see the industry being ready for it." B of A decided it would be best to "focus on the things that we see as important to our future."
Eventually, Mr. Robinson said, B of A might expand its dedicated mortgage sales force - something the top two mortgage lenders, Countrywide Financial Corp. and Wells Fargo & Co., have done aggressively. He said it may also eventually reopen its correspondent channel, which it left along with subprime in 2001. But he indicated neither of these was a priority.
There is no timeline for the initial changes, but "this is not a 10-year vision," Mr. Robinson said. "It's something that's certainly less than that."
