Residential loan production picked up at Bank of America Corp. But legal costs help keep the mortgage business operating in the red.
Second-quarter mortgage originations totaled nearly 43,000 loans for $13.701 billion, according to earnings data reported Wednesday.
Home lending strengthened compared to the first quarter, when volume was more than 36,000 loans for $10.835 billion. BofA revised its prior period numbers up from $10.833 billion originally reported.
But activity slid from the second quarter of last year, when production reached approximately 112,000 units for $26.773 billion. Year-earlier originations were originally reported at $26.772 billion.
The most-recent quarter included $11.099 billion in first mortgage fundings and $2.602 billion in home-equity loan closings.
From Jan. 1 through June 30, production amounted to around 79,000 loans closed for $24.536 billion.
The origination pipeline closed out the second quarter 15 percent higher than the first quarter — pointing to a possible improvement in third-quarter business.
The mortgage servicing portfolio continued to shrink, falling to $760.0 billion last month from $780.0 billion at the end of March and $986.4 billion as of June 30, 2013. Last month’s servicing portfolio included $505 billion in mortgages serviced for investors.
Home lending assets finished the second quarter at $326.635 billion. The total was cut from $334.453 billion three months earlier and $353.970 billion 12 months earlier. The latest total included $237.136 billion in residential mortgages and $89.499 billion in HELs.
Also on BofA’s balance sheet were $46.815 billion in commercial real estate loans, off from $48.840 billion in the previous quarter but up from $42.126 billion in the year-earlier period.
After receiving $2.438 billion in repurchase claims during the second quarter, BofA finished June with $21.712 billion in outstanding claims.
The loss before income taxes from the consumer real estate services segment narrowed to $4.5 billion in the second quarter from $7.0 billion in the prior period. But performance in the business worsened from the same period last year, when the loss was $1.6 billion.
The year-over-year deterioration was largely the result of an after-tax $3.6 billion increase in litigation expense. Pre-tax litigation expense in the second quarter was $4.0 billion.
The report indicated a $650 million settlement reached on July 15 with AIG resolves residential mortgage-backed securities claims. In addition, the two firms settled three actions brought by BofA against AIG-subsidiary United Guaranty.
“Bank of America has now resolved approximately 95 percent of the unpaid principal balance of all RMBS as to which RMBS securities litigation has been filed or threatened for all Bank of America-related entities,” the report stated.
The Wall Street Journal reported Wednesday that BofA met with the Department of Justice on Tuesday and offered $13 billion to settle a probe into mortgage securities. The meeting reportedly concluded with no agreement, as the Justice Department wants billions more.
The parent company earned $2.8 billion before income taxes, swinging from a first-quarter loss of $0.7 billion but falling well short of $5.5 billion profit in the second-quarter 2013.
Headcount in legacy assets servicing was cut to 22,300 from 26,200 in the first quarter and 37,900 in the second-quarter 2013.
As of the end of last month, company-wide staffing stood at 233,201 full-time equivalent employees. BofA reduced headcount from 238,560 three months earlier and 257,158 a year prior.
Branch count was lowered by 72 from March to 5,023.
