New flat-fee mortgage from BofA
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As Bank of America Corp. phases out the Countrywide Home Loans brand -- you can read what I wrote about in The Times today -- the banking giant is rolling out interesting twists on its own mortgage offerings.
The bank today unveiled a flat-fee plan to allow people buying homes to see beforehand exactly how much they will pay for all closing costs. Those costs include the annoying application and processing charges by lenders, along with fees charges by such service providers as appraisers.
Bank of America will have three flat-fee tiers -- $1,995, $2,495 or $2,995 -- depending on the state. California, as if you had to guess, is in the most expensive tier.
So far, the program is available in full-service Bank of America offices but not the former Countrywide Home Loan offices acquired last year when the Charlotte, N.C., bank bought Calabasas-based Countrywide Financial Corp. And for now, it’s only for purchase loans, not the refinancings that have, at least temporarily, made home lending a boom industry again.
The idea is to make the flat fees available eventually for refis and at the home-loan offices, Bank of America Home Loans President Barbara Desoer said in an interview.
In 2007, Bank of America attracted attention with a no-fee mortgage. But consumers tended to regard that loan with some suspicion, on the theory that you can’t get something for nothing, Desoer said.
Many competitors were offering similar no-fee loans two or three years ago, but these days few lenders have been offering promotions of any kind. Indeed, said Inside Mortgage Finance publisher Guy Cecala, ‘today mortgage lending is very expensive.’
That fact should help Bank of America attract attention with its new plan. Still, as Cecala added, in an environment in which borrowers are out to capture 30-year rates at below 5%, the bank will have to compete on low rates as well as on low fees.
As if to address that issue, Bank of America’s new approach includes a satisfaction guarantee. If a person decides that another lender’s loan is better after shopping at Bank of America, the bank will write them a check for $250, Desoer said.
Because Bank of America is so large, the moves are likely to attract high interest from consumers and perhaps force rivals to adopt similar programs, said Greg McBride, a senior analyst at the financial information firm Bankrate Inc.
McBride praised another Bank of America offering I described in today’s article -- a plain-language, one-page summary of loan terms to be provided to borrowers when the bank originates a mortgage and again when the loan closes.
That’s a big deal, he said, because of how many consumers complain that they didn’t understand loan terms. McBride said that on government-mandated disclosure forms, key terms can be buried where the borrowers may not see them.
-- E. Scott Reckard
