B of A Cuts Legacy Delinquency Mortgage Portfolio in Half

Mortgage & Real Estate

Bank of Americas effort to reduce the size of its legacy servicing portfolio via servicing sales and workouts has reduced its quarterly expenses by $1 billion per quarter, according to B of A chief executive Brian Moynihan.

There has been a dramatic reduction in 60-day delinquencies which has allowed us to bring down the costs, Moynihan said during a presentation at a Goldman Sachs financial services conference Tuesday.

He pointed out that the number of delinquent mortgages dropped to less than 400,000 as of Sept. 30, down from 900,000 a year ago.

It took 58,000 employees to service those loans in the summer of 2012. Now B of As legacy asset servicing unit has just 27,600 employees. And legacy asset servicing expenses have been reduced by nearly $1 billion from 4Q 2012 to $2.2 billion in the recent third quarter.

That reduction in expenses will be a significant difference for us in 2014, Moynihan said.

The CEO is also looking forward to working through all remaining legacy representation and warranty claims and other litigation facing B of A in 2014.

Bank of America has already paid $43 billion in reaching settlements and agreements with Fannie Mae, Freddie Mac, federal regulators and others.

The Charlotte, N.C.-based bank estimates that remaining RW claims could cost up to $4 billion and other litigation could cost another $5 billion. B of A currently has $14 billion in reserves to cover those losses.

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