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.