Bank of America (BoA) says it expects to implement new lending guidelines in its consumer mortgage business as soon as is practical after it combines operations with Countrywide Financial Corp.
Following the purchase, the combined mortgage business plans to continue to offer retail customers the following types of first lien mortgages:
- conforming loans underwritten to standard guidelines of government-sponsored enterprises and the government, including Federal Housing Administration and Department of Veterans Affairs 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 the company says lessens the possibility of short-term payment shock; and
- fixed-period ARMs that provide borrowers low initial rates with the security of fixed payments, subject to protections against steep increases in payment amounts.
BoA adds that will discontinue non-traditional mortgages where monthly payments may not cover all interest (option ARMs); significantly curtail other non-traditional mortgages, such as certain low-documentation loans; and implement 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.
Additionally, the Bank of America Charitable Foundation and Countrywide plan to provide $35 million in grants and low-cost loans to both help local and national nonprofit organizations engaged in foreclosure prevention, and to purchase vacant single-family homes for neighborhood stabilization. The goal, through 2009, incorporates foreclosure prevention efforts by both financial institutions.