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Paul Kiesel
Paul Kiesel
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Risky Mortgages: No Longer Part of Bank of America’s Lending Lexicon

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Bank of America is making plans to overhaul its mortgage product menu, after they complete their acquisition of Countrywide Financial. According to CNNMoney, Bank of America will offer traditional mortgages that fit government sponsored enterprise guidelines. Interest-only fixed rate and adjustable rate mortgages that have long reset periods will be part of this new lending plan.

 

This appears to be a great decision on Bank of America’s part, even if it’s somewhat late to help current borrowers, as it will at least curb financial risks for the bank and for future borrowers of these proposed mortgages. On top of that, having adjustable-rate mortgages, which are carrying a stigma as of late, that have long reset periods in order to lessen the likelihood of short-term payment spikes, seems to be the most appropriate and responsible way to go about writing ARM loans.

 

Also, Bank of America will no longer originate subprime mortgages or loans that allow for a borrower to only make payments that are less than the monthly interest due. This is a huge step away from the terrible teaser rate loans that had become popular over the last few years. Since it will be eliminating teaser rate loans, it is almost guaranteed that Bank of America will reduce offering other nontraditional loans, particularly ones that do not require much documentation.