Get ready for a revolution in the first mortgage business. Bank of America Corp. introduces its No-Fee Mortgage, a product that will fundamentally alter the rules of the first mortgage playing field.
The No Fee Mortgage Plus is a step on Bank of America’s path to becoming a portfolio lender. Positioned as a cross-sales opportunity, it is only available to B of A customers (today), including those with deposit or credit card accounts. Below is a description of the product:
- No fees - No application, appraisal, loan origination, title, flood determination or other customary fees
- No Private Mortgage Insurance – No longer required to pay the typical insurance if customers put down less than 20%
- “Close-on-Time Service Guarantee” – If B of A does not close the loan within 25 days, it will pay the customer’s first month’s mortgage payment, including principal and interest
- “Best Value Guarantee” – If customers can find a better deal, B of A will pay them $250
Offered on a full array of mortgage products including fixed rate, ARM and interest-only, the No Fee Mortgage Plus is one of its “disruptive strategies” to re-invigorate mortgage lending business.
What does this mean for credit unions?
The no-fee mortgage has three implications for credit unions:
- Cooperation is more urgent than ever before. If you are not involved with one of the 50+ mortgage lending CUSOs, consider your options now. Without the economies of scale and cost advantages that these CUSOs provide, it will be very difficult to compete under this new model. You may start by checking out Prime Alliance’s article this week on the five-step sniff test for evaluating vendor partners.
- Re-assess pricing and fee strategies. The other large participants in the mortgage market including Countrywide, Wells, Wamu, Citi, and Chase will surely adjust their pricing strategies. Evaluate your products and be ready for changes to remain competitive.
- Focus more on the HELOC market. If your credit union is unable to compete in this fundamentally altered first mortgage lending environment, reach members through the HELOC opportunity.