Saturday
October 1, 2016

Bank of America: We're Not Easing Up

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Bank of America: We're Not Easing Up

The head of Bank of America recently said at a New York investor conference that the bank has no plans to ease mortgage standards, even as federal regulators are seeking to open the lending environment more to potential home buyers.

Credit Crunch

"You won't see us start to expand our credit much past what we've done today," BofA CEO Brian T. Moynihan said. "I don't think there's a big incentive for us to start to try to create more mortgage availability where the consumers are susceptible to default. … I know that doesn't sound good for an instant housing recovery and faster housing markets, but it's actually good because, in the long-term, it keeps housing more fundamentally based."

The mortgage giant has paid more than $70 billion in legal settlements in the aftermath of the financial crisis, which is more than any other company. Many of its loans stemmed from subprime lender Countrywide Financial Corp., which Bank of America acquired in 2008.

Moynihan said that the bank will continue underwriting mortgages to those who can prove they have the ability to repay them. A customer who is not able to make a down payment of at least 10 percent should consider renting rather than trying to purchase a home, Moynihan said.

Meanwhile, government regulators have sought to open the credit box to get more buyers off the sidelines. Federal Housing Finance Agency Director Melvin L. Watt announced last month that mortgage-financing giants Fannie Mae and Freddie Mac will provide clearer guidelines of when it would require banks to repurchase loans that later default. The move is expected to give banks more confidence to extend lending.

Source: “Bank of America Won’t Loosen Mortgage Standards, CEO Says,” Bloomberg (Nov. 12, 2014)