NEW YORK — Bank of America Corp. will exit the wholesale mortgage lending business Tuesday, limiting its dealings with mortgage brokers as it focuses on loans made with consumers and large community banks.
But some fear the move could leave fewer options for consumers as they shop for the most competitive mortgage rates.
The decision also leaves Wells Fargo & Co. as a main player in the wholesale game, which lets consumers secure loans through mortgage brokers instead of the bank directly. Last year, JPMorgan Chase & Co. said it would no longer purchase loans originated by brokers, noting in an internal memo that loans done by Chase professionals outperformed those originated by brokers.
Barbara Desoer, president of Bank of America Home Loans, played down the origination quality issue, emphasizing this as a strategy shift that lets the bank play on its strengths and work more directly with customers.
"We tend to prefer business where we have scale," Desoer said in an interview. "We love the direct-to-consumer business because it's very closely aligned with the consumer franchise that Bank of America has."
The bank will stop taking wholesale applications Tuesday. It will honor loans in the pipeline.
About 1,000 employees will be affected, with some jobs lost. Many staffers will be offered the chance to transfer to other loan units--including correspondent, largely community banks, retail sales working directly with consumers and warehouse lending, which provides short-term loans to small, independent mortgage banks, letting them fund home mortgages.
Last year, the bank captured 22% of the retail mortgage market, compared with 8% of the wholesale channel, according to Inside Mortgage Finance, a trade publication. Bank of America acquired the wholesale channel with its 2008 acquisition of Countrywide Financial.
Desoer declined to predict how those percentages would change.
"As long as you're very careful in what you do, warehouse lending is an excellent line of business to be in because it's consistently profitable," said Glen Corso, managing director of the Community Mortgage Banking Project, a public policy group representing independent mortgage banking companies nationwide. Some "really question whether there's a lot of future in wholesale lending. They feel like brokers are really going to be under a microscope from here on out."
Even so, not everyone views the decision as a positive for consumers. "The fewer wholesale lenders there are, the less choices consumers are going to have," says Ritch Workman, president of Workman Mortgage Co., a small lender in Melbourne, Fla.