Bank of America is reportedly cutting up to 4,000 mortgage jobs, both on the servicing and origination side of the business.
The cuts are due mainly to falling application volume in light of rising interest rates, according to a Reuters report.
Wells Fargo, JPMorgan Chase and Citigroup have also recently downsized their mortgage operations – however, a majority of those cuts have been on the servicing side. Looming Basel III regulations that will require banks told hold more money in reserves based on loans outstanding – as well as the increased risk of enforcement action or litigation as a result of these rules – is causing the larger U.S. financial institutions to divest themselves of their mortgage servicing rights.
About 1,200 of the 4,000 Bank of America employees to be laid off have already been notified, according to the report. Most of those employees work on new loans. Another 2,800 job cuts, mostly on the default servicing side, will come later this year.
Last month it was reported that Bank of America would be laying off about 2,100 mortgage workers – however it is unlcear whether those are included in the 4,000 layoffs reported this week.
Earlier this week, a federal jury in Manhattan found Bank of America liable for fraud in connection with faulty mortgages that Countrywide Financial Corp. – acquired by Bank of America in 2008 – sold to Fannie Mae and Freddie Mac just prior to the housing meltdown.
In that case, Countrywide executive Rebecca Mairone was found liable for one count of fraud. Mairone, now a managing director at JPMorgan, is accused of overseeing a process called the ‘High Speed Swim Lane,’ ‘HSSL’ or ‘Hustle’ that was allegedly used by Countrywide in 2007 to speed mortgage originations by side-stepping certain aspects of the application review process. Federal prosecutors allege that this program, in part, is what led to the shoddy loans that were passed onto Fannie Mae and Freddie Mac.
Penalties are yet to be determined.