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BoA Earnings & Originations Worse, Apps Higher

$49.9 billion Q4 production

January 16, 2009

By MortgageDaily.com staff

Bank of America Corp. saw quarterly originations decline but said new activity picked up at the end of the year. While earnings deteriorated last year, results might have been worse without the acquisition of Countrywide Financial Corp.

Last year, the Charlotte, N.C.-based behemoth funded $181.0 billion across the total corporation, earnings data reported today indicated. Production declined from $188.6 billion in 2007.

Mortgage production for the fourth quarter was $49.9 billion, down from a revised $58.6 billion during the third quarter. But business was better than the fourth-quarter 2007, when volume was $43.9 billion.

The latest quarter included $5.3 billion in home-equity fundings, down from $7.0 billion in the third quarter.

BoA noted that "mortgage application volume increased significantly following the November Treasury announcement."

The residential mortgage servicing portfolio ended the year at $2.057 trillion, including $1.654 trillion in mortgages serviced for investors. Loans serviced edged up from $2.026 trillion three months earlier. A year earlier -- before the July 1, 2008, acquisition of Countrywide -- BoA's servicing portfolio was just $0.517 trillion.

At the end of December, the institution held $248.0 billion in residential mortgages, less than $257.0 billion at the end of September. Home-equity holdings ended last year at $152.5 billion, up from $151.9 billion. Discontinued real estate loan holdings -- which include subprime and option adjustable-rate mortgages --were $20.0 billion on Dec. 31, eroding from $22.1 billion.

Nonperforming residential loans finished last year at $7.0 billion, surging from $4.6 billion three months earlier. Nonperforming home-equity loans were $2.7 billion, up from $2.0 billion, and nonperforming discontinued mortgages were $77 billion -- more than double the $33 billion in the prior quarter.

BoA said it modified 230,000 loans last year and ultimately plans to modify 630,000 loans for more than $100 billion -- though much of the concessions will likely be borne by investors of its residential mortgage-backed securities.

Commercial real estate loans on the books ended the fourth quarter at $64.7 billion, $1.0 billion more than at the end of the third quarter.

Mortgage banking income was $4.4 billion last year, far surpassing 2007's $1.3 billion and reflecting the Countrywide acquisition. Mortgage earnings were $1.6 billion during the most recent quarter, falling from $1.8 billion in the third quarter but higher than $0.5 billion in the fourth-quarter 2007.

Company-wide earnings were $4.0 billion in 2008 -- sinking from $15.0 billion during 2007. A fourth-quarter-2008 loss of $1.8 billion compared poorly to a $1.2 billion third-quarter profit and an $0.3 billion profit 12 months earlier.

BoA reported 243,075 full-time employees as of Dec. 31, lower than 249,993 on Sept. 30 but up from 209,718 at the end of 2007. Included in the most recent count were 6,000 home-retention associates.

BoA said its acquisition of Merrill Lynch & Co. Inc. -- which had a fourth-quarter net loss of $15.3 billion and a $27.1 billion full-year loss -- occurred on Jan. 1 and didn't impact last year's earnings.

As part of its deal to acquire the former Wall Street giant, the U.S. Treasury Department will use funds from the Troubled Asset Relief Program to pump $20 billion more into BoA. The preferred stock acquired by the Treasury pays an 8 percent dividend. Also part of the deal was the government's agreement to cover 90 percent of losses on a $118 billion portfolio after the first $10 billion in losses.

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