Bank of America Corp.'s decision to exit the direct-to-consumer wholesale channel is yet another sign that banks are backing away from the increased liability of purchasing loans directly from mortgage brokers.
On Tuesday B of A said it will eliminate about 1,000 wholesale account executives who solicit business and fulfill loans from independent mortgage brokers. Brokers shouldered a big portion of the blame for the current crisis because of the increased risk of defaults and longer time it takes to underwrite such loans.
B of A is the third-largest player in this fragmented segment of the market, with just 8% market share. Wells Fargo & Co. and Citigroup Inc. are the largest remaining players that still purchase loans directly from brokers. JPMorgan Chase & Co. exited the business last year.
Many of the employees affected will be offered jobs in B of A's core retail, correspondent or warehouse lending units.
Doug Jones, president of Bank of America's Institutional Mortgage Services, said the banking giant is focused on expanding its much larger correspondent and warehouse lending units, providing "enhanced liquidity to the smaller financial institutions and independent mortgage companies that supply mortgages as our correspondent clients."