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BofA Lifts Production But Shrinks Mortgage Business

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Although Bank of America Corp. increased its quarterly mortgage production, the lender remains a shell of its former self prior to the financial crisis. BofA cut its mortgage holdings and reduced its servicing portfolio. Meanwhile, the rate of residential delinquency inched higher — with delinquency on government-insured loans jumping 13 basis points.

The banking behemoth generated more than 80,000 loans for $21.248 billion in residential loan production during the third quarter, according to earnings data released Wednesday.

Business picked up from the second quarter, when $18.935 billion in mortgages were originated. Volume, however, fell well short of the third-quarter 2011, when fundings totaled $33.885 billion and the company was still purchasing production from the correspondent channel.

BofA has dramatically scaled back its mortgage originations over the past three years; during just the third quarter of 2009, the company originated nearly $100 billion.

In the nine months ended Sept. 30, originations amounted to $56.181 billion.

The latest quarter’s activity included $20.315 billion in first mortgage production and $0.933 billion in home-equity loan fundings. Refinance share was 83 percent.

The total mortgage servicing portfolio closed out last month at $1.4757 trillion. BofA cut its servicing from $1.5864 trillion at the end of June and $1.9174 trillion a year prior.

The latest total included $1.142 trillion in home loans serviced for investors, down from $1.224 trillion three months earlier.

The balance sheet reflected $247.246 billion in residential mortgages. Home loans outstanding were reduced from $252.543 billion three months earlier and $266.430 billion 12 months earlier.

Residential delinquency of at least 30 days, excluding non-performing and government-insured loans, was 2.28 percent, inching up from 2.27 percent in the second quarter but better than 2.44 percent a year earlier.

Including loans insured by the Federal Housing Administration, delinquency worsened to 11.49 percent from 11.36 percent three months earlier and 10.56 percent a year earlier.

Home-equity loans in the investment portfolio totaled $112.260 billion, also lower than the prior quarter when $118.011 billion in HELs were owned, and the same quarter in the prior year, when HELs outstanding were $127.736 billion.

HEL delinquency was unchanged at 1.1 percent but 40 BPS lower than at the same point last year.

Another $9.876 billion in discontinued real estate loans were owned, down from $10.059 billion as of June 30 and $11.541 billion as of Sept. 30, 2011.

The Charlotte, N.C.-based company reported that it has completed or approved $4.75 billion in principal reduction offers as part of the servicers settlement. More than $7.6 billion in relief is required.

BofA owned $37.579 in commercial real estate loans, growing its CRE portfolio from $36.535 billion in the prior quarter but cutting the total from $40.888 billion as of the same date in 2011.

BofA was hit with another $4.983 billion in repurchase claims, though that was less than the $8.213 in claims for the second quarter. The latest activity brought outstanding repurchase claims to $25.462 billion. BofA estimates that repurchase losses could extend $6 billion beyond its current reserves.

During the three months ended Sept. 30, the consumer real estate services business had a $1.392 billion loss before income taxes. Losses worsened from $1.217 billion in the second quarter but weren’t as bad as $1.922 billion in the same period last year.

Third-quarter income across the entire organization before income taxes was $1.1 billion, tumbling from $3.1 billion in the prior period and sinking from $7.4 billion in the same period during the prior year. The latest results included $1.6 billion in litigation expense.

Within its legacy assets and servicing division, headcount was 41,700, down from 42,400 in the second quarter and 42,100 in the third-quarter 2011.

As of the end of last month, 272,594 people were employed company-wide, increasing from as staff of 275,460 as of June 30. Headcount stood at 288,739 as of the same date last year.

BofA operated 5,540 banking centers, fewer than the 5,594 branches at the end of the second quarter.

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