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Quarterly residential mortgage production by lender. Subprime, Alt-A, home equity and conforming originations. Volume by quarter since 2003.

BofA Delinquency Rises, But Not Originations

$74.1 billion in Q3 production

Oct. 19, 2010

By staff

Sharply higher third-quarter mortgage production at other lenders was not matched by Bank of America Home Loans -- which saw virtually no increase in originations. Meanwhile, the rate of home-loan defaults deteriorated as the company continued to buy back government-insured loans. Commercial mortgage delinquency was also worse.

Bank of America Corp. reported Tuesday $74.1 billion in third-quarter originations, no different than the second quarter. The unchanged activity contrasts third-quarter reports from Citigroup Inc., which said business shot up two-thirds to $18.6 billion; JPMorgan Chase & Co., where volume rose more than a quarter to $41.2 billion; and Quicken Loans Inc.'s estimated three-quarters increase.

Business at BofA was down from $98.4 billion during the same period last year. Year-to-date fundings add up to 219.7 billion.

Included in the latest quarter's production was $2.1 billion home-equity loans, about the same as the prior period. Refinances made up nearly two-thirds of quarterly fundings.

BofA's huge mortgage servicing portfolio contracted, falling to $2.0795 trillion from $2.1276 trillion three months earlier and $2.1483 trillion a year earlier. The Sept. 30 portfolio included $1.669 trillion in loans serviced for investors.

U.S. residential mortgage holdings eased to $243.1 billion from $245.0 billion at the end of June. HEL assets declined to $141.6 billion from $146.3 billion, and discontinued real estate holdings edged down to $13.4 billion from $13.8 billion.

Mortgage delinquency of at least 30 days worsened to 9.69 percent from 9.18 percent at the end of June. Late payments were substantially worse than 3.96 percent on Sept. 30, 2009.

But the third-quarter 2010 delinquency rate would have only been 2.77 percent excluding loans insured by the Federal Housing Administration.

"We continue to repurchase delinquent FHA insured loans which masks the continued improvement in our 30+ delinquency trends," the company explained -- adding that 18,178 of its 23,573 delinquent mortgages are FHA.

BofA noted in the earnings report that it is amending and re-filing 102,000 foreclosure affidavits in the 23 states that require judicial foreclosures. The disclosure quickly drew criticism from Ohio Attorney General Richard Cordray, who said the bank potentially still faces "significant financial exposure in many, many cases if they are now acknowledging that the evidence that they previously submitted to the courts was fraudulent" and that it is subject to possible sanctions and penalties by the courts.

"You have to remember, these are the same people who have essentially acknowledged that they committed fraud in perhaps tens of thousands of cases," Cordray exclaimed. "Now they tell us that they have fixed the problem in a matter of weeks.

"We are certainly not just going to take their word for it."

New repurchase claims at the Charlotte, N.C.-based bank-holding company ended an escalating trend and fell to $4.060 billion from $4.550 billion in the second quarter. Still, claims were much higher than the $2.120 billion reported for the third quarter of last year. More than three-quarters of repurchases are from the 2006 and 2007 vintages.

Outstanding repurchase claims as of Sept. 30 were $12.9 billion, and the majority of those were demands from Fannie Mae and Freddie Mac -- which BofA sold $1.2 trillion in loans to from 2004 to 2008. BofA has declined to repurchase around $3.2 billion in repurchase demands.

Commercial real estate assets dropped to $52.8 billion from $61.6 billion.

At the same time, commercial real estate delinquency of at least 90 days jumped to 0.33 percent on Sept. 30 from just 0.08 percent three months earlier.

Mortgage banking income was $1.756 billion in the third quarter, leaping from $1.020 billion in the prior period. It was also better than the $1.424 billion earned in the same quarter during last year.

But overall net earnings before taxes at the home loans and insurance unit was a loss of $0.344 billion -- though that was better than the $1.534 billion second-quarter loss and the loss of $1.635 billion a year prior.

Bank of America Corp. had a $7.3 billion third-quarter loss, swinging from a second-quarter $3.1 billion profit. A year ago, the company had a $1.0 billion loss. The deterioration was attributed to a $10.4 billion goodwill impairment charge tied to its global card services as a result of the financial reform legislation enacted in July.

The bank-holding company had 285,822 employees as of the end of last month, more than 283,224 at the end of June and 282,457 at the same point last year.

Bank of America profile

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