Reply #36: Bank of America Says ‘Thank Goodness’ for Countrywide (Update1)

[Demeter]

http://www.bloomberg.com/apps/news?pid=20601087&sid=aXOdO.gs_ee0&refer=home

March 13 (Bloomberg) -- Bank of America Corp.’s mortgage- origination business, the largest in the U.S., is booming after the purchase of Countrywide Financial Corp. and as lower loan rates push a wave of refinancing, the unit’s chief said.

“Volume is good, application quality is holding up and the acquisition of Countrywide is really paying off for us with the additional capacity,” Barbara Desoer, head of mortgage, home equity and insurance, said in a telephone interview yesterday. “Thank goodness we have it.”

Kenneth Lewis, Bank of America’s chief executive officer, told reporters yesterday he expects the Charlotte, North Carolina-based company to make money this year after posting a profit in January and February. Last month, he said its “stars” so far in 2009 were businesses acquired with Countrywide, the largest U.S. home lender, and Merrill Lynch & Co.

The average rate on a typical 30-year fixed mortgage was 5.03 percent in the week ended yesterday, according to Freddie Mac. Federal Reserve purchases of mortgage bonds helped drive rates down from 6.46 percent in late October, to a record 4.96 percent in mid-January. Bank of America isn’t yet sure exactly how much its lending will be boosted by the flexibility that the U.S. last month gave Fannie Mae and Freddie to help consumers with little or no home equity refinance, Desoer said.

Desoer, 56, also said that the bank is seeking to make more “jumbo” mortgages, which start at $417,000 in most areas and up to $729,750, the limits for now U.S.-run mortgage firms Fannie and Freddie. The company’s is offering “extremely competitive” rates on jumbo mortgages offered directly to consumers, she said.

‘Balance-Sheet Capacity’

“Bank of America has balance-sheet capacity and we’ve allocated it to jumbos given our presence in some of the states and regions where that’s important,” she said. “We’re very much open for business.”

The bank sees an opportunity to do more of the loans with Merrill Lynch’s “mass-affluent” customers, even as it continues to integrate the acquired company, she said. Its Web site says it offers $800,000 30-year fixed-rate loans with 20 percent down payments in New York for 6 percent, versus the 6.78 percent average in the state, according to Bankrate.com.

To keep up with mortgage demand, Bank of America has added roughly 3,000 employees to its origination unit, including about 1,000 new to the company and 500 shifted from its home-equity division, as well temporary workers, Desoer said. The staff totals about 25,000, Dan Frahm, a spokesman, said.

New Mortgages

Desoer wouldn’t discuss the recent performance of home loans already on its books, saying only “you know what’s happening with” home prices and unemployment “and the potential impact those can have on borrowers being under stress.”

Margins on new mortgages sold off as government-supported mortgage bonds, such as those guaranteed by Fannie and Freddie, are higher than a year ago, she said. U.S. efforts to keep rates on those loans low will be an “extended event,” she added.

Bank of America’s mortgage-servicing business has more than doubled its staff that deals with troubled borrowers to 5,000 in the past year. Still, the company hasn’t always provided the best service, in part because of the volume of calls for help, Desoer said.

“We do not claim to be delivering the customer experience in every single case the way we would be proud of, but we are committed to getting there,” she said. “On a day where there’s been something in the media and the call volume goes through the roof, we are not good. And we apologize for that.”

Loan Modifications

Another hindrance has been the different standards for modifying loans guaranteed by different companies, within mortgage bonds or held for investment, or HFI, at the bank, she said. A federal program announced last month may change that.

Having “one program will help to some degree because the staff will be more fungible,” she said. “Where you need the Fannie expert for a modification, versus a Freddie expert, versus an HFI expert now, those teams become more fungible. That’s an advantage where existing staff will become more productive.”

Desoer said that her bank expects to shift its reworking of loans under a settlement with more than 30 state attorneys general over charges of fraudulent lending at Countrywide, which it acquired last year, to the similar federal protocols. It hasn’t yet reached an agreement to do so, she added.

Those Countrywide modifications are subject to a lawsuit by a hedge fund that alleges Bank of America is paying for the settlement with funds due to mortgage-bond investors. Desoer said that it isn’t changing loans where investors haven’t agreed to permit the modifications, and hopes bondholder objections to aspects of the federal program don’t impair it.

The Consumer

“Clearly, the direction from Treasury in the wording of their announcement is this becomes usual and customary and that’s what we’re hoping the outcome is,” she said. “And we don’t see any major obstacles. But, as you mention, there are people with perspectives that may take different actions.”

The bank isn’t “going to do anything to put a contract at risk, but, at the same time, we’re thrilled that there’s a standard and we have a head start because of the AG settlement.”

Bank of America and its units accepted capital and guarantees from the federal rescue program of $163 billion, and the bank posted a $1.79 billion fourth-quarter loss. Its aid package was expanded in January after losses at Merrill Lynch spiraled beyond what Lewis expected.

Trying to understand the long-term effects of help for homeowners is something Desoer’s team does “a lot,” she said.

“What’s the consumer psychology that will survive?” she said. “How impacted will the U.S. consumer be by this downturn? How much will be temporarily changed, versus how much will be permanently changed, in their view of debt?”


I MUST BE SICKER THAN I THOUGHT. I'M HAVING HALLUCINATIONS!

ON FURTHER THOUGHT: MAYBE I SHOULD BREAK OUT THE ALCOHOL. KILL THE PAIN, AND GIVE MYSELF AN EXCUSE--DTs!