Bank of America real estate loan eats closing fees

Program could save home buyers thousands
By: Janis Mara: Inman News
Anyone who has been confounded with unexpected and seemingly inexplicable fees at the closing table will probably appreciate a new Bank of America mortgage loan program, Mortgage Rewards.

The program, currently available only to Bank of America customers, could save home buyers about $2,000 on a $200,000 loan, according to the bank. Higher loan amounts would yield greater savings, the bank said, varying according to location and other factors.

The program waives the loan origination fee, application fee, appraisal fee, flood determination fee, tax service fee and most other fees associated with closing. It doesn't pay for title insurance, though.

"Application volume is way up" since the program rolled out in late April, according to Steve Ozonian, national home-ownership services executive for the bank. Ozonian wouldn't give more specific numbers.

This has been an eventful year for the bank, which in April reported soaring profits, with first-quarter net income of $4.7 billion. Its quarterly profits are up from $2.68 billion, or 91 cents a share, during the same quarter a year ago.

The Mortgage Rewards program sounds a bit too good to be true. But Ozonian says the bank is able to absorb the closing fees because it speeded up and simplified its loan processing procedures, saving the bank money.

"We took a look at the entire mortgage process, application, approval and fulfillment and tightened that up using technology and better procedures," Ozonian said. "This enables us to create a more efficient mortgage process and instead of dropping it into our pockets we are passing the savings on to the consumer."

The executive said the fees will not be rolled into the loan's interest rate.

"The note rate is still the comparative street rate. We're not marking up interest rates and then bundling these services in because we're marking up rates. We encourage consumers to check our rates. They will find we have competitive rates," Ozonian said.

"What a lot of lenders will do is they will say we can take care of all these fees but you end up paying a higher interest rate, note rate, on the mortgage instrument," Ozonian acknowledged. "But we are not doing that."

The bank will pay the appraisal fee, he said. Consumers won't have to front the money when the appraiser shows up to scope out the house.

"We assign the appraiser and the appraiser knows they are working with the bank and the bank doesn't require that the existing customer who is part of the program write a check for the appraisal," the executive said.

The program doesn't include title insurance, Ozonian said. "We don't have the process internally – that's done by the title company."

As another extra, those who borrow using Mortgage Rewards get one free year of the company's borrower's protection plan. The plan pays mortgage principal and interest for up to six months if the customer loses his/her job, and pays off the whole mortgage if the mortgage holder should die.

When the free year is up, customers will be notified by a letter or phone call and given the option to continue on a paying basis.

"It won't continue by default," Ozonian said.

Currently, the program is available in 21 states and the District of Columbia and will be available in the northeast United States in the fall, according to Ozonian.