By Peter Rudegeair
Oct 24 (Reuters) - Bank of America Corp said onThursday that it was cutting up to 4,200 mortgage jobs as fewerborrowers refinance, and fewer home loans go bad.
The layoffs are the latest round of job cuts at major banksas rising mortgage rates cut into demand for refinancing homeloans. Wells Fargo & Co, JPMorgan Chase & Co andCitigroup Inc. have announced thousands of layoffs amongthem in recent months.
At Bank of America, the third largest U.S. mortgage lender,about 1,200 employees were notified this week that they would beterminated. Most were full-time workers in the division thatprocesses new mortgages, a spokesman said.
Before the end of the year, the bank is looking to cutanother 3,000 jobs in the division that collects payments fromborrowers who are behind, the spokesman added. Most of thelayoffs in that division are contractors.
Five years after the financial crisis, many of the loansthat should never have been made have already gone bad, leavingbanks with fewer troubled loans to manage.
For Bank of America, mortgage loans that were delinquent bymore than 60 days fell by 94,000 to 398,000 in the thirdquarter. The bank expects a further decline to below 375,000 bythe end of 2013.
Mortgage lending volume at Bank of America was down 11percent in the third quarter from the second quarter. The numberof applications the bank had received but not yet processed wasdown 60 percent in the end of September from the end of June..
The bank expects to make fewer home loans in the fourthquarter and will look to cut more mortgage jobs, Chief ExecutiveOfficer Brian Moynihan said during an Oct. 16 quarterlyconference call with analysts.
The job cuts at the bank follow another round of layoffs--in the third quarter, the second-largest U.S. bank eliminatedmore than 9,000 full-time positions, or 3.6 percent of its totalstaff.
Finance chief Bruce Thompson said on the Oct. 16 call thatthe reductions were concentrated in the unit that collectspayments on home loans, the unit that makes new home loans, andin many of the bank's branches.
A majority of the latest cuts will affect employees based inCalifornia, Texas and Florida.
News of the layoffs was first reported by the Wall StreetJournal.
HIGHER RATES SLOW REFINANCING
Rising interest rates have weighed on mortgage refinancingat banks since the spring. The average interest rate on a prime30-year mortgage stood at 4.39 percent in the week that endedFriday, according to the Mortgage Bankers Association (MBA),down from a high of 4.80 percent in September but above the 3.59percent rate in early May.
With rates having recently come down from their Septemberhighs, demand for refinancing has increased by one third, andoverall mortgage applications are up by 18 percent, according toMBA data. But even with that pick-up, applications are down by52 percent from their level in early May.
With these declines, Wells Fargo & Co, the largestU.S. mortgage lender, said on Oct. 17 that it was cutting 925mortgage jobs. That is in addition to the 5,300Wells Fargo mortgage employees who were notified that they wouldbe laid off in the third quarter.
Bank of America was the third-largest U.S. mortgage lenderin the first six months of 2013, making 5.2 percent of all U.S.home loans, following JPMorgan Chase, according to InsideMortgage Finance, an industry publication.
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