Bank of America Corp. has reached an agreement to purchase a $9 billion portfolio of residential mortgage loans from Toronto-Dominion Bank (TD), as the Canadian lender seeks to reduce certain holdings to comply with new regulatory asset caps. The move comes as TD adjusts its balance sheet in response to a $434 billion cap on its US retail banking assets, which was imposed by regulators following the bank’s guilty plea for failing to prevent money laundering by criminal organisations.
The portfolio consists of jumbo mortgages—loans too large to qualify for government-backed programs. These mortgages are typically issued to borrowers with high credit scores and significant wealth. Bids for the portfolio were due last week, with Bank of America currently in discussions to finalize the purchase. While the deal has not been confirmed, sources familiar with the matter indicated that talks are still ongoing.
Jumbo loans, which exceed the size limits for conventional loans backed by government entities like Fannie Mae and Freddie Mac, are becoming increasingly attractive to US banks. This interest is further buoyed by potential regulatory changes that could lessen the capital requirements under the Basel III Endgame regulations, which would have forced banks to hold additional capital against residential mortgage loans.
The transaction, if completed, would help TD streamline its holdings while providing Bank of America with a valuable portfolio of high-quality loans, further consolidating its position in the US mortgage market.
