NEW YORK -- Bank of America Corp. said Friday it is splitting its mortgage business into two units, with a new division created specifically to handle foreclosures and discontinued loan products.
The bank said the new Legacy Asset Servicing unit will be responsible for resolving issues involving faulty paperwork that led Bank of America to suspend foreclosures in all 50 states in October. After reviewing procedures, it resumed the actions nationwide in December.
The legacy unit also will handle mortgage modifications and buyback claims on bad home loans sold to investors. It will be led by Terry Laughlin, who joined Bank of America in July 2010 as an executive in its mortgage unit handling credit loss mitigation strategies.
The move is the latest in a series of management shifts since Brian Moynihan took over as CEO in January 2010.
Bank of America Home Loans lost $8.92 billion in 2010, according to the bank's year-end financial report, largely because of the toxic loans it acquired when it bought Countrywide Financial Corp. in 2008.
Countrywide was writing one in six of the nation's mortgages in 2006. The Calabasas, Calif.-based company spiraled into disaster as it became clear many of its borrowers wouldn't be able to repay mortgages that had required no proof of income or down payment, and contained adjustable rates that quickly made monthly payments unaffordable.
In addition to the continuing cascade of consumer defaults, Bank of America also has been beset with buyback claims and lawsuits over the investment securities backed by those loans.
It reached a settlement last month with Fannie Mae and Freddie Mac regarding some of Countrywide's toxic investments, and made payments of about $2.6 billion to the two government-owned mortgage finance companies. At that time, the bank said it still faces claims of about $2.7 billion from the two. Analysts have estimated the bank faces up to $10 billion in claims from private buyers.
In regulatory filings the bank has said it, Countrywide and its Merrill Lynch unit have been named as defendants in suits related to the sales of more than $375 billion in mortgage-backed securities.
Bank of America Home Loans will continue to handle new loans and the servicing of loans -- or collection of monthly payments -- that are up-to-date. It will be continue to be led by Barbara Desoer, who has run the unit since 2008.
The bank wrote $306 billion in new mortgages in 2010. At the end of the year, it had a mortgage servicing portfolio of $2.06 billion, according to regulatory filings.
Separately, the company said it will exit the reverse mortgage origination business and shift the staff from that business to other mortgage operations.