According to a
Bank of America Corp.
) has cut 450 mortgage jobs. This is part of BofA's ongoing
strategy to reduce its workforce in the mortgage banking
BANK OF AMER CP (BAC): Free Stock Analysis
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WELLS FARGO-NEW (WFC): Free Stock Analysis
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Employees in BofA's West Coast offices were the target of
retrenchment this time. The jobs of the aforesaid number of
employees were terminated with immediate effect. These employees
will however, receive two months' pay and will be eligible for
severance pay in the future. Notably, the company is hiring in
its other wings, thereby giving a chance to these employees to
find jobs in the same.
BofA has been facing lower demand for new loans as rising
interest rates have made loans costlier. Further, with gradual
improvement in the economic scenario, the prices of real estate
properties are likely to increase, which will make it costlier
for investors to invest in a property with a huge loan burden.
Hence, new mortgage loans and refinancing activities are facing a
setback. In 2013, BofA's mortgage banking revenues declined
nearly 18% year over year.
Further, as per the latest data available from the Mortgage
Bankers Association (MBA), mortgage applications have remained
sluggish for the week ended Feb 7. The Market Composite Index,
which measures total loan application volume, fell 2%. Also, the
Refinance index dipped 0.2% and the Purchase Index declined 5%.
Going forward, we believe that the loan demand could be lower
than what is being expected. Hence, large mortgage lenders such
JPMorgan Chase & Co.
Wells Fargo & Company
) are striving to minimize losses by adopting stringent
Currently, BofA carries a Zacks Rank #3 (Hold).