Rising Foreclosres Bank Of America To Change Lending Guidelines
Saturday, May 10, 2008
Banking giant Bank of America (BofA) said this week that it intends to revamp its mortgage lending guidelines as soon as the acquisition of subprime lender Countrywide Financial Corp. is complete.
The changes are expected to come after the closing of the transaction in the third quarter of 2008.
While the updated guidelines will include additions inspired by the need to continue to offer affordable homeownership opportunities, Bank of America plans to keep its long-standing policy of not originating subprime loans and says the company strives to maintain appropriate standards that will ensure borrowers are placed into safe loan options.
"Putting and keeping Americans in their homes ensures the continued prosperity in the communities we serve," said Bruce Hammonds, Global Consumer Credit Executive. "We believe this purchase is a positive step forward because it offers customers access to a full range of banking services, best-in-class mortgage products and offers the trust and integrity that customers, associates and shareholders have come to expect from Bank of America."
Hammonds asserted that quality loan underwriting remains a top priority for Bank of America—even after the addition of Countrywide's loan portfolio.
"We think it's important to clearly explain the changes in mortgage lending practices once we operate as a combined company," he added. "We recognize this tightening, by definition, restricts the availability of credit to some borrowers. However, this will help ensure that those who get loans can afford to repay them.”
Below is a list of first lien mortgage products that will continue to be offered by Bank of America (Source: Bank of America:)
Conforming loans underwritten to standard guidelines of government-sponsored enterprises and the government, including FHA and VA loans and other loans designed for low-and moderate-income borrowers.
Interest-only fixed-rate and adjustable-rate mortgages (ARMs) that are subject to a 10-year minimum interest-only period, which lessens the possibility of short-term payment shock.
Fixed-period ARMs that provide borrowers low initial rates with the security of fixed payments, subject to protections against steep increases in payment amounts.
The following changes also will be implemented:
The discontinuation of non-traditional mortgages where monthly payments may not cover all interest, or so-called option-ARMs.
The curtailing of other non-traditional mortgages, such as certain low documentation loans.
The implementation of enhanced borrower protections soon after completion of the Countrywide purchase, including limits on prepayment penalties and protections on non-traditional loans such as interest-only and hybrid ARMs, which limit the risk of future payment shock and provide long-term affordability.
The changes are expected to come after the closing of the transaction in the third quarter of 2008.
While the updated guidelines will include additions inspired by the need to continue to offer affordable homeownership opportunities, Bank of America plans to keep its long-standing policy of not originating subprime loans and says the company strives to maintain appropriate standards that will ensure borrowers are placed into safe loan options.
"Putting and keeping Americans in their homes ensures the continued prosperity in the communities we serve," said Bruce Hammonds, Global Consumer Credit Executive. "We believe this purchase is a positive step forward because it offers customers access to a full range of banking services, best-in-class mortgage products and offers the trust and integrity that customers, associates and shareholders have come to expect from Bank of America."
Hammonds asserted that quality loan underwriting remains a top priority for Bank of America—even after the addition of Countrywide's loan portfolio.
"We think it's important to clearly explain the changes in mortgage lending practices once we operate as a combined company," he added. "We recognize this tightening, by definition, restricts the availability of credit to some borrowers. However, this will help ensure that those who get loans can afford to repay them.”
Below is a list of first lien mortgage products that will continue to be offered by Bank of America (Source: Bank of America:)
Conforming loans underwritten to standard guidelines of government-sponsored enterprises and the government, including FHA and VA loans and other loans designed for low-and moderate-income borrowers.
Interest-only fixed-rate and adjustable-rate mortgages (ARMs) that are subject to a 10-year minimum interest-only period, which lessens the possibility of short-term payment shock.
Fixed-period ARMs that provide borrowers low initial rates with the security of fixed payments, subject to protections against steep increases in payment amounts.
The following changes also will be implemented:
The discontinuation of non-traditional mortgages where monthly payments may not cover all interest, or so-called option-ARMs.
The curtailing of other non-traditional mortgages, such as certain low documentation loans.
The implementation of enhanced borrower protections soon after completion of the Countrywide purchase, including limits on prepayment penalties and protections on non-traditional loans such as interest-only and hybrid ARMs, which limit the risk of future payment shock and provide long-term affordability.
