The mortgage industry today is booming! Bank of America Home Loans is a diversified financial marketing and service holding company engaged primarily in residential mortgage banking and related businesses. It is a wholly owned subsidiary of Bank of America. It formerly conducted business as Countrywide Financial, but the name was changed on April 27, 2009. Bank of America Home Loans is composed of:
- Mortgage Banking, which originates purchases, securitizes, and services mortgages. In 2006 Countrywide financed 20% of all mortgages in the United States, at a value of about 3.5% of United States GDP, a proportion greater than any other single mortgage lender.
- Banking, which operates a federally chartered thrift that primarily invests in mortgage loans and home equity lines of credit primarily sourced through its mortgage banking operation.
- Capital Markets, which operates as an institutional broker-dealer that primarily specializes in trading and underwriting mortgage-backed securities.
- Global Operations, which provides mortgage loan application processing and loan servicing.
During the year ended December 31, 2005, for example, the Mortgage Banking segment generated 59% of the company's pre-tax earnings.
On January 11, 2008, Bank of America announced that it planned to purchase Countrywide Financial for $4.1 billion in stock. On June 5, 2008, Bank of America Corporation announced it had received approval from the Board of Governors of the Federal Reserve System to purchase Countrywide Financial Corporation. Then, on June 25, 2008, Countrywide announced it had received the approval of 69% of its shareholders to planned merger with Bank of America. On July 1, 2008, Bank of America Corporation completed its purchase of Countrywide Financial Corporation. In 1997, Countrywide had spun off Countrywide Mortgage Investment as an independent company called Indy Mac Bank. Federal regulators seized Indy Mac on July 11, 2008, after a week-long bank run.
The Mortgage Banking segment produces mortgage loans through a variety of channels on a national scale. Nearly all of the mortgage loans the company produces in this segment are sold into the secondary market, primarily in the form of mortgage-backed securities. In 2006, 45% of those mortgages were conventional non-conforming loans, loans too large to sell to Fannie Mae. The company generally performs the ongoing servicing functions related to the mortgage loans that it produces. It also provides various loan closing services, such as title, escrow and appraisal. The Mortgage Banking segment consists of three distinct sectors: Loan Production, Loan servicing and Loan Closing Services. The role of Loan Production is to originate and fund new loans, and to acquire already-funded loans through purchases from other lenders. Loan Production produces mortgage loans through four divisions of Countrywide Home Loans: Consumer Markets, Full Spectrum Lending, Wholesale Lending and Correspondent Lending.
Consumer Markets and Full Spectrum Lending offer loans directly to consumers. Loans produced by these two retail division are originated, funded, and sold by Countrywide. Consumer Markets offers a wide variety of products, whereas Full Spectrum Lending focuses primarily on products appropriate for customers with less than prime-quality credit.
Wholesale Lending offers loans to consumers whose loans are originated by another mortgage broker. These loans are funded and sold by Countrywide, but originated by other lenders.
Correspondent Lending purchases mortgage loans from other lenders, which include mortgage bankers, commercial banks, savings and loan associations, home builders and credit unions. These loans may be sold by Countrywide to end-investors on the secondary market, but are originated and funded by other lenders.
Loan servicing services loans, i.e., collects payments from the borrower, handles escrow accounts, tax and/or insurance payments (if applicable), then remits "advances" to the investor's trustee as specified in the Pooling and Servicing Agreement (PSA). Loan servicing typically retains a fraction of the payment made (typically 25 - 45 basis points of the unpaid principal balance) as a "servicing fee".
Loan servicing also generates income in the form of interest on monies received and held prior to paying scheduled advances to the trustee, fees charged for late payments, force-placed insurance, document requests, legal fees, payoff statements, etc.
Land safe and its subsidiaries offer loan closing services, including real estate appraisal services, automated credit reporting products, flood determination services and residential title services for the six major counties of Southern California.
The Banking segment consisted of Countrywide Bank, FSB and Countrywide Warehouse Lending. Formerly, the bank was known as Countrywide Bank, N.A., a nationally chartered bank that was regulated jointly by the Office of the Comptroller of the Currency and the Federal Reserve, but it converted its charter to a federally chartered thrift that is regulated by the Office of Thrift Supervision. Countrywide Bank is the 3rd largest Savings and Loan institution and is the fastest growing bank in United States history. Assets from deposits are currently approaching $125 billion. Countrywide Bank primarily originates and purchases mortgage loans and home equity lines of credit for investment purposes. The majority of these loans are sourced through its mortgage banking subsidiary, Countrywide Home Loans. The Bank obtains retail deposits, primarily certificates of deposit, through the Internet, call centers and more than 200 financial centers, many of which were located in Countrywide Home Loans' retail branch offices as of April 1, 2007.
Countrywide Warehouse Lending provides warehouse lines of credit to mortgage bankers, who use these funds to originate loans. These mortgage bankers are primarily customers of Countrywide Home Loans' Correspondent Lending division and the Capital Markets divisions; the mortgage bankers use warehouse lines of credit from Countrywide Warehouse Lending to help originate loans, then sell those loans to Countrywide through Correspondent Lending or Capital Markets.
United States Code by the United States Government
Title 12—Banks and Banking
Chapter 11—Federal Home Loan Banks
This chapter may be cited as the ``Federal Home Loan Bank Act´´. (Act of July 22, 1932, ch. 522, § 1, 47 Stat. 725.)
Chapter 11A—Federal Home Loan Mortgage Corporation
Notes
Section 301 of title III of Pub. L. 91–351, as amended by Pub. L. 101–73, title VII, § 731(a), Aug. 9, 1989, 103 Stat. 429; Pub. L. 102–550, title XIII, § 1382(a), Oct. 28, 1992, 106 Stat. 4002, provided that:
“(a) This title may be cited as the ``Federal Home Loan Mortgage Corporation Act´´.
“(b) It is the purpose of the Federal Home Loan Mortgage Corporation—
“(1) to provide stability in the secondary market for residential mortgages;
“(2) to respond appropriately to the private capital market;
“(3) to provide ongoing assistance to the secondary market for residential mortgages (including activities relating to mortgages on housing for low- and moderate-income families involving a reasonable economic return that may be less than the return earned on other activities) by increasing the liquidity of mortgage investments and improving the distribution of investment capital available for residential mortgage financing; and
“(4) to promote access to mortgage credit throughout the Nation (including central cities, rural areas, and underserved areas) by increasing the liquidity of mortgage investments and improving the distribution of investment capital available for residential mortgage financing.”
