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Bank of America to PHH: It’s Over

Bank of America is terminating its private label mortgage origination services agreement with nonbank lender PHH Mortgage Corporation, a wholly-owned subsidiary of New Jersey-based PHH Corporation, according to an 8-K filing by PHH with the Securities and Exchange Commission.

Bank of America sent written notice to PHH on September 27, 2016, that it was exercising its right to terminate without cause the agreement pursuant to which PHH Mortgage provides the services on behalf of Bank of America subsidiary Merrill Lynch, according to the filing.

The loss of Merrill Lynch originations could mean $45 million less in revenue for PHH for Fiscal Year 2017. The filing states that based on PHH’s estimate of Merrill Lynch’s loan closing volume for 2016, PHH expects Merrill Lynch originations to contribute approximately $45 million in pre-tax earnings for FY2016.

The termination of the agreement is effective as of March 31, 2017, according to the filing. Bank of America has the contractual right to request termination and transition assistance for up to 12 months after that date.

Bank of America spokesperson Terry Francisco said he believed the bank’s Merrill Lynch clients would be best served by insourcing all consumer lending support through the bank’s internal resources.

“We are confident that our originations and servicing support capabilities will provide an excellent experience for our valued Merrill Lynch clients,” Francisco said in an email to MReport.

PHH did not immediately respond to a request for comment.

The announcement of the termination of the agreement was the second time that Bank of America has pulled part of its Merrill Lynch business from PHH this year. In April, the bank made the decision to handle internally the origination of certain mortgage loan products. At the time, PHH Corporation President and CEO Glen Messina issued a statement saying, “We believe these decisions reflect the broader dynamics in our industry, including higher compliance and other costs associated with a more onerous regulatory environment.”

About Author: Seth Welborn

Seth Welborn is a Harding University graduate with a degree in English and a minor in writing. He is a contributing writer for MReport. An East Texas Native, he has studied abroad in Athens, Greece and works part-time as a photographer.
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