Before the financial crisis, mortgages were a source of profits for banks. But when the crisis hit, reputations were destroyed and earnings were lost. At present, mortgage lending has lots of uncertainties.
Bank of America, the nation?s second largest bank, reported Wednesday that mortgage originations increased 18 percent to $21 billion compared to last year. But the bank announced that its mortgage unit lost money due to problem mortgages issued before the crisis.
Five years after the housing bubble burst, mortgages remained a problem for the banking industry. They can increase the revenue but banks still need to deal with the risky mortgage lending of the past decade. Some of the problems they face include lawsuits, regulations, and foreclosures.
According to Bank of America?s chief financial officer Bruce Thompson, the housing market has improved with home prices gradually increasing. This was echoed by Wells Fargo and JPMorgan Chase, which are the country?s two largest mortgage lenders.
Thompson noted that recovery is shaky. Banks remain cautious because of the headwinds out in the market. The housing industry is experiencing the early stages of the increase in home prices. There are still some questions with regards to the other factors in the economy.
Citigroup executives were cautious when asked about the housing market last Monday. Citi?s chief financial officer wondered if the United States is generating enough jobs to bolster economic recovery. Bank of America is the last bank to report its third quarter profits.
Mortgage originations went up at Wells Fargo, JPMorgan and Bank of America. It dropped at Citigroup. Refinancing made up most of the banks? mortgage growth in the third quarter. At Bank of America, it was 83 percent. That means homeowners save money and banks earn from the fees. Refinancing does little to increase the housing market recovery compared to sales.
Source: http://www.paydayloansmag.com/bank-of-america-says-mortgages-still-a-problem-for-banks/
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