BofA creates foreclosure unit

By @ibtimes on

Bank of America Corp appointed on Friday a new foreclosure and loan modifications czar, and created a new unit to oversee problem home loans in a bid to sort out its on-going foreclosure issues, becoming the first large U.S. bank to do so.

The new unit creates a seventh major division at the bank reporting directly to Chief Executive Brian Moynihan, an indication that the largest U.S. mortgage servicer is attempting to be more aggressive in resolving its problem mortgage loan portfolio.

Analysts said the move signals major U.S. mortgage lenders have not yet turned the corner on the problem home loans on their books.

This is a significant step. If Bank of America has these issues, what kind of problems does everyone else have? said Matt McCormick, a Cincinnati-based portfolio manager at Bahl & Gaynor Investment Counsel Inc.

The change splits the largest U.S. bank by assets' mortgage business into two parts: One focused on current and new mortgages, and another dedicated to foreclosures and workouts.

Bank of America will promote Terry Laughlin to oversee the new unit, called legacy asset servicing. The division will have roughly 30,000 employees.

Laughlin, 56, is a former FleetBoston executive who joined the bank in July 2010 as a credit loss mitigation executive, reporting to Barbara Desoer in the mortgage division.

The new unit will manage foreclosures and loan modifications, and will work to resolve mortgage repurchase claims from investors.

Long term, a company spokesman said the division could dedicate itself to working out types of problem assets at the bank beyond mortgages.

Desoer will continue as Bank of America's home loans president, and oversee the mortgage operations for customers that are not delinquent on their loans.

She will focus on building the bank's home loans business for new customers, BofA said.

Laughlin's new unit faces a number of challenges.

Last Fall, the bank temporarily suspended foreclosures nationwide, after critics alleged the industry cut corners on foreclosure paperwork and banks used so-called robo-signers, or employees who signed thousands of foreclosures without reviewing the documents.

The bank has since restarted foreclosures, refiling about 16,000 foreclosures in December.

Investors have also feared the bank could be on the hook to rebuy billions in toxic home loans held by investors in mortgage-backed securities.

In January, the bank settled some repurchase claims with Fannie Mae and Freddie Mac, and recorded a $3 billion charge in the fourth quarter for the settlement.

BofA's home loans unit lost $4.9 billion in the fourth quarter of 2010, largely due to the settlement charge.

Separately on Friday, the bank announced it was exiting the reverse mortgage lending business.

The bank began making reverse mortgages in 2006, and added to that business in 2007 when it bought Reverse Mortgage of America, and again in 2008 in the Countrywide Financial deal.

Employees will be reassigned to other divisions within home loans, and those who have not been moved will be able to apply for new posts.

Bank of America shares closed down 1 percent on Friday at $14.29 on the New York Stock Exchange.

(Reporting by Joe Rauch; Editing by Bernard Orr)

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