Bank of America (BoA) has reported 2016 first quarter earnings from mortgage banking as $433 million, a decline from their $694 million in the first quarter of 2015. This is due to the bank selling fewer secondary market loans, Chief Financial Officer Paul Donofrio reports.
Donofrio explained that the bank’s strategy is to place more of its mortgages in its portfolio. These loans are not sold, which means the bank does not gain any income. This strategy was elaborated on by CEO and BoA Chairman Brian Moynihan, who stressed that the company was moving to control more of its own destiny. He wants BoA customers to know that when the bank originates the mortgage, it won’t be sold off to another financial institution that the borrower knows nothing about. The customer can rest assured that they are entering into a deal with the same company that will be with them throughout their mortgage.
The bank’s net income dropped to $2.7 billion overall, down from its 2015 Q1 net income of $3.1 billion. Its consumer mortgage banking declined from $288 million to $122 million, while the Legacy Assets & Servicing’s mortgage portion went from $461 million in Q1 2015 to $372 million in Q1 2016.
Mortgage production declined from $16.9 billion to $16.4 billion, with first mortgage production dropping from $13.7 billion to $12.6 billion. Another factor in the drop of total income was the increase in intercompany charges, which climbed from $55 million to $61 million. BoA income from home equity lines of credit increased, however, from $3.2 billion to $3.8 billion.
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