From HW:
Bank of America Executive Vice President Terry Laughlin said the new mortgage servicing division will work through its $1 trillion in legacy and delinquent mortgages in the next three years.
In February, BofA put Laughlin in charge of the new division, leaving the current and new mortgages to Barbara Desoer. The former 14 million mortgage servicing portfolio, which stands at roughly $1.2 trillion will be split, with 6.7 million loans going to the legacy mortgage division, Laughlin said at an investor conference Tuesday.
“We’re going to get after it. And we’re going to put it to bed over the next 36 months,” he said.
BofA transferred all loans 60-days delinquent or worse and all discontinued mortgage products like subprime, interest-only and option-adjustable rate mortgage loans. A significant portion of the loans were originated between 2004 and 2008. Some of the discontinued products are even current and performing well, Laughlin said, but the bank will move them to his department anyway to free up Desoer.
“To take a step back, we are creating a good bank, bad bank structure,” Laughlin said. “Initially there would be very few delinquencies in Barbara’s new business.”
BofA brought in experienced staff to handle the troubled mortgages. Former Saxon Mortgage CEO Tony Meola will work with other managers on the default servicing side to create new loss mitigation programs and loss mitigation strategies.
Larry Washington was moved over from the Merrill Lynch side to handle the representations and warranties claims. In this part of the speech, Laughlin noticeably switched his tone. While the bank has made its way through about 75% of the requests from Fannie Mae and Freddie Mac for BofA to buyback loans that did not meet their requirements, private-label investors will face a tougher road.
“We have talked with a number of private-label investors who expressed an interest in talking with us,” Laughlin said. “We will talk with any party that wants to talk. But any discussions with private-label securities holders will be in the context of what’s in the best interest of Bank of America shareholders.”
Laughlin also said the bank concluded its review of recent foreclosure problems such as robo-signing. Foreclosure sales at the bank plummeted in the fourth quarter after a self-imposed moratorium was put in place for the review. Laughlin assured investors that the basis for their foreclosures was sound. Roughly 50% of the properties were vacant, and the average time spent in delinquency was 600 days.
“We have restarted the foreclosure process, and we expect to see normalized foreclosure rates over the next two to three months,” Laughlin said.
Roughly 50% of the properties were vacant, and the average time spent in delinquency was 600 days.
So they are getting through the vacants in 300 days, and the occupieds in 900 days?
I really hope there serious about clearing their portfolio, but the sooner this is done the quicker the housing market can get back to normal (foreclosure and shorts need to get done to 10-15% of total sales before we can see a more normal market). Of course its still a case of I’ll believe it when I see it. We’ve heard rumors of BofA ready to clear out their portfolio for months and it never seems to happen.
“normalized foreclosure rates” sure sounds vague.
Three years? Wow, BoA, not impressed! And average time for delinquencies is 600 days?
That’s a lot of free cheese if BoA holds $1 trillion in delinquent mortgages. Just think of the last (occupied) foreclosure: free rent for years and years…
Oy vey.
IIRC long ago, the normal foreclosure went like this: It was 3 months of not paying you get a NOD and then the next month the sheriff was at your door.
600 days. And counting. Frankly, at this point w/all the distress mounting, I’ll be shocked if they can sort through it in just 3 years.
I think I won’t hold my breath.
Did anyone catch what size can they are kicking? After the expiration of the NOD the foreclosure then needs to be published for a number of weeks, with the actual auction later. Then they have to either get the old owner out through negotiation or file an Unlawful Detainer with the court. It takes a few weeks to set the case for trial and to have writs issued. The the lockout id scheduled by the Sheriff. The process is slow and can be further delayed if the old owner files a quiet title action or declaires bankruptcy
3 years? Could happen, but a lot of people will be in homeless shelters and tents.
This sounds to me like Geithner & Co. have made more promises to the banks that in case of financial distress, the feds will be there to cushion the fall. Call me cynical…
So, $1,000,000,000,000 in bad mortgages. Lets’s assume they average $200,000 each, so 5,000,000 mortgages in three years – roughly 5,000 per day for the whole country. San Diego county has about 1/100 of the country’s population, so something like 50 per day in SD? Seems a bit unlikely to me.
It’s nice to hear an official guesstimate from the top of the BOA org chart. Three years sounds optimistic given what we’ve seen in the last two years though….very optimistic. I’ll believe it’s finished when I see that it’s finished (probably not in 2014 though). Thanks for the post Jim.