Bank of America mid-week told its retail loan officers nationwide that the lender will halt, for now, originations of cash-out refinancings, citing what it calls a “surge of refinancing activity” and capacity problems.
A memo written by BofA home loans sales executive Matt Vernon noted that “while we regret the inconvenience this will cause to some of our customers in the short term, we are making the responsible choice that is in the best interest of our long-term capabilities to provide a predictable customer experience.”
The memo was provided to ASR sister publication National Mortgage News by a confidential source and confirmed by two loan officers who currently work at the bank.
It's unclear how much of BofA's current volume is cash-out refis. Late Thursday a spokesman for the bank did not return a media inquiry about the matter.
In the third quarter about half of all home fundings at BofA were refis.
According to figures compiled by Freddie Mac, 18% of all refis that closed in 3Q11 were cash-out loans. However, many lenders have extremely tight underwriting standards on the product.
BofA continued to de-emphasize residential loans in the fourth quarter, producing just over $22 billion in mortgages, a stunning 75% decline from 4Q10.
The bank is in the process of closing its correspondent channel and continues to lose some of its top retail producers. “When I heard the news [about the cash-outs] it just killed me,” said one LO.