– New York | February 10, 2025
Bank of America (BofA) is in negotiations to acquire a $9 billion portfolio of jumbo mortgages from Toronto-Dominion Bank (TD) as the Canadian lender seeks to trim assets and comply with U.S. regulatory limits, sources familiar with the matter revealed.
The deal has not yet been finalized, with discussions still ongoing, and both banks declining to comment due to the private nature of the negotiations.
Jumbo Mortgages: A Growing Market for U.S. Banks
The portfolio in question consists of jumbo mortgages—home loans that exceed the size limits set by government-backed entities such as Fannie Mae and Freddie Mac. Unlike conventional mortgages, these loans do not qualify for government support but are typically issued to high-net-worth borrowers with strong credit profiles.
Jumbo mortgages, while riskier due to their size, are attractive to lenders because they are generally held by borrowers with high credit scores and significant financial resources.
The timing of the potential deal aligns with growing interest in jumbo mortgages among U.S. banks. Regulatory adjustments under consideration—including potential loosening of capital requirements tied to the Basel III Endgame proposals—could incentivize banks to expand their mortgage portfolios. If those rules, which force banks to hold more capital against mortgage assets, are softened or scrapped, demand for jumbo loans may increase further.
TD Bank’s Motivation for Selling
TD Bank is under regulatory pressure to reduce its U.S. footprint, following an asset cap of $434 billion imposed on its U.S. retail banking division in October 2023.
The restriction was part of a $3.1 billion settlement after TD pleaded guilty to failing to prevent money laundering by drug cartels and other criminal organizations.
Read More: TD Bank accelerates CEO transition following regulatory fallout
To comply with the U.S. asset cap, TD has been shedding low-yielding securities and adjusting its loan portfolio. At a banking conference in January, TD CEO Raymond Chun signaled the bank’s intention to exit certain loan portfolios, hinting at asset sales like this one.
If the deal is finalized, it would mark a significant strategic move for both BofA and TD—helping TD manage its regulatory obligations while potentially expanding BofA’s presence in the jumbo mortgage market.
