MReport September 2015 - Cool Under Pressure

TheMReport — News and strategies for the evolving mortgage marketplace.

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20 | Th e M Rep o RT Feature The second-quarter results follow a strong first quarter of the year, in which Bank of America originated $13.7 billion in first lien residential mortgages, up from $8.9 billion in the comparable year-ago quarter. Spokesman Terry Francisco credits much of the growth to the drop in 10-year Treasury rates at the end of 2014. Most of the borrowers who sought loans during the interest rate decline closed during Q4 2014. "A secondary driver was the increase in first-time homebuy- ers during the first quarter," Francisco added. The lender's prime differentia- tor is targeting mortgage prospects who are already bank custom- ers as the bank seeks to further deepen those relationships. "More than half of our borrowers have some relation- ship, either through a checking, deposit, or other account with Bank of America or through an investment account with Merrill Lynch," Francisco said. The more relationships that the prospective borrower has with the bank (including Merrill Lynch accounts), the better the dis- count he or she can receive on a mortgage, giving Bank of America borrowers a pricing advantage. Beyond concentrating on bor- rowing prospects with whom the bank already has an established relationship, another advantage Bank of America has compared with some of its competitors is an alliance with Accenture to pro- vide staff for mortgage overflow, according to Francisco. "So we have flexible staffing and we don't have to pile on staff when we have an influx of loans," he said. The flexible staffing augments the lender's ongoing program to add 3,000 loan officers across the coun- try, a process that started in 2013. According to Francisco, staffing flexibility and customer communication were key factors in the lender's ranking second in the 2014 J.D. Power primary mortgage origination satisfaction study, behind Quicken Loans and just slightly ahead of Chase and U.S. Bank. Francisco attributes the performance to Bank of America's 80 percent on-time mortgage closing rate. BB&T originated nearly $5.5 bil- lion in loans in the second quarter, up nearly 10 percent from the comparable year-ago period. Yet the lender's average residential mortgage loan portfolio decreased 7.4 percent, reflecting BB&T's strategic decision to continue to sell conforming mortgage loan production. The lender could significantly expand its mortgage origination business as a result of its recent aggressive acquisition history that includes the purchases of Susquehanna Bancshares Inc. and Bank of Kentucky, giving BB&T a much stronger presence in Kentucky and the mid-Atlantic markets. Other top originators in the South region are SunTrust and BBVA Compass and Regions Bank. The East J PMorgan Chase dominates mortgage origination among East region-based lenders and is second nationally only to Wells Fargo. And like Wells, JPMorgan Chase has enjoyed consistent growth, boasting four straight quarters of increased loan origination with its second-quarter performance. Beyond citing its growth figures and placement in the J.D. Power mortgage origination satisfaction survey, the lender is tight-lipped about how it reached its level of success, though reducing expenses and eliminating seldom-used products has it lender increase its focus and efficiency, according to a spokesperson. Some East region-based lend- ers are committed to gaining a stronger foothold in the mortgage business, but they are attempting to do so while recognizing that mortgage originations will not make up for lost refinancing busi- ness as mortgage rates increase. JPMorgan Chase has committed to increasing loans originated and retained on the balance sheet. The company announced in February that it had slashed 12,000 of its mortgage banking staff in 2014, but no further cuts have been an- nounced this year. The earlier cuts were in line with the changes in the market, according to a bank spokesperson. As a result of elimi- nating staff and reducing its loan products from 37 to 18, the lender says it cut its annual mortgage business expenses by $2.3 billion (30 percent). A further reduction to 15 mortgage loan products is expected by the end of this year. According to Chase, some 80 percent of its mortgage loans were in the 15 remaining prod- ucts. Cutting the rarely originated mortgages enabled the lender to concentrate on providing better service and efficiency. A Chase spokesperson pointed to the lender's acquisition of Ocwen Financial's servicing business as a sign of the bank's commitment to the mortgage lending business. A publicly traded non-bank mortgage lender, PHH Mortgage has committed to grow its footprint, opening six new retail offices in different regions of the country last year—part of the lender's plan to expand its cover- age in the top 25 home purchase markets through additional retail offices over the next two years. PHH executives see the open- ing of these offices as helping to diversify the lender's revenue base, broaden the market reach, and complement its existing business. TD Bank, which focuses its mortgage lending from Maine through Florida, started making a serious commitment to build its mortgage business a couple of years ago, according to Scott Haymore, head of mortgage pricing and secondary markets. "We had very little mortgage exposure during the downturn, "More than half of our [mortgage] borrowers have some relationship, either through a checking, deposit, or other account with Bank of America or through an investment account with Merrill Lynch." —Terry Francisco, Bank of America

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