Bank of America To Exit Wholesale Lending

Includes: BAC, CFC
by: Herb Greenberg

Bank of America (NYSE:BAC) has been telling mortgage brokers that as of the end of the year, the company will be exiting the wholesale mortgage lending business. A B of A spokesman confirmed the move. It’s unclear as to why one of the largest banks in the world, not known for making risky loans, would make such a move when the wholesale lending industry has been shrinking, which should translate into more business for those who remain.

One school of thought is that with its $2 billion purchase of preferred securities from Countrywide Financial earlier this year, BofA could still wind up with Countrywide’s lucrative servicing rights on a portfolio of high quality loans.

(Despite what you hear, Countrywide (CFC) also made plenty of good loans.) As a result, there would be no need to take on more loans from mortgage brokers. That’s just one interpretation, mind you, from one industry insider who has been correct in his assessment of the industry before and throughout much of the mortgage mess.

Wouldn’t B of A simply buy Countrywide? And accept Countrywide’s debt? According to the theory: No need to if it can cherry pick what it wants.