The number of job cuts at Bank of America could reach 2,100 as the Charlotte bank trims its mortgage operations, according to a report from Bloomberg.
The cuts include the 1,000 layoffs announced at two locations in Ohio at the end of August. Mortgage offices in California, Virginia, Washington and Texas are also affected, Bloomberg reported, citing two sources with direct knowledge of the plans.
No major layoffs were slated for North Carolina, though four employees in the state were let go, Bank of America said late last month.
The bank declined Monday to confirm the total number of cuts, citing a company policy, but did not dispute Bloomberg’s figures. Spokesman Dan Frahm said the bank thinks it has made the necessary adjustments to reflect lower demand for mortgage refinancings but was not able to say whether more would ultimately occur.
“We will continue to monitor what happens with the market,” he said.
The largest U.S. banks rapidly scaled up their mortgage operations over the past two years as record-low interest rates prompted millions of homeowners to refinance their mortgages.
Wells Fargo, for example, hired 10,000 new employees in its mortgage fulfillment division over a 21-month period, Chief Financial Officer Tim Sloan told investors Monday.
But since May, interest rates have shot up more than a full percentage point – dramatically reducing refinance volume.
Banks that grew to accommodate the demand are now working quickly to cut costs.
Wells Fargo has announced more than 3,000 job cuts in the past two months in that unit, Sloan said, including nearly 300 in Charlotte. JPMorgan Chase has said it will cut 15,000 jobs in its mortgage division.
“You have the refi rate slowing down across the entire banking industry, not just Bank of America,” said Dan Marchon, a bank analyst for Raymond James & Associates, on Monday.
“You have these cuts that are going to be taking place to really rationalize the mortgage business.”
The pullback has sparked questions among investors about how Wells Fargo, the nation’s largest mortgage lender, will be able to increase its income in the coming quarters. Bank of America is a much smaller player in the market.
That means a dip in refinancing activity is likely to have less of an impact on Bank of America compared with Wells Fargo, Marchon said.
Mortgage banking income made up about 10 percent, or $1.2 billion, of Bank of America’s noninterest income in the second quarter.
For Wells Fargo, mortgage banking made up 26.4 percent, or $2.8 billion, of its noninterest income in the quarter.
But Wells Fargo also balanced refinance volume with new home purchases.
Bank of America’s mortgage originations were more heavily tilted toward refinancing, said Guy Cecala, publisher of Inside Mortgage Finance.
Where 56 percent of Wells Fargo’s mortgage originations were for refinancings in the second quarter, the figure was 83 percent at Bank of America.
“So they’re much more vulnerable to a downturn and the need to trim staffing in that area,” Cecala said.
Dunn: 704-358-5235 Twitter: @andrew_dunn
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