Refinancing | BofA Said To Put Off Refinance Clients As U.S. Spurs Demand
February 9, 2012 – 4:03 am
(Updates with JPMorgan comment in the 16th paragraph.)
Feb. 8 (Bloomberg) — Bank of America Corp., struggling to handle mortgage refinancing after a U.S. program boosted demand, is telling some customers to wait 90 days before starting an application, said two people with knowledge of the policy.
The firm began a reservation system last week that asks those who call during high-volume times if they wish to be contacted again in 60 to 90 days, said two people who requested anonymity because the measure hasn’t been announced. Wells Fargo Co. and New York-based JPMorgan Chase Co., the biggest U.S. mortgage lenders, said they aren’t stalling customers.
The delays may push borrowers to other lenders or discourage them from taking advantage of record low interest rates. The government’s Home Affordable Refinance Program, which helps homeowners lower payments, has increased refinance applications and strained capacity at Bank of America, which exited some mortgage lines last year. The U.S. program, now dubbed HARP 2, was broadened in 2011 so more people qualify.
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“The HARP 2 program is a much bigger deal than people thought, and Bank of America is dysfunctional to begin with,” Paul Miller, an analyst at FBR Capital Markets Corp., said in an interview. “This is a result of getting out of the business at the exact time they should be getting into the business.”
Customers with Bank of America checking accounts or who apply at a branch aren’t subject to the delay, said one person.
‘Deficit of Trust’
President Barack Obama made jolting the housing market from its doldrums a focus of his State of the Union address last month, when he proposed a separate program to help more borrowers take advantage of low interest rates. The proposal would let homeowners who are current on their payments save $3,000 a year through refinancing into lower-interest loans guaranteed by the Federal Housing Administration.
“No more red tape; no more runaround from the banks,” Obama said in his Jan. 24 address to Congress. “A small fee on the largest financial institutions will ensure that it won’t add to the deficit, and will give banks that were rescued by taxpayers a chance to repay a deficit of trust.”
Chief Executive Officer Brian T. Moynihan told employees last month he was proud the firm stuck with clients during the tumult of 2011, when it sold assets to repair the balance sheet.
“What we didn’t do is what a lot of people are doing around the world, which is walk away from their customers,” Moynihan, 52, said during a Jan. 19 staff meeting.
‘Strong Demand’
The move is the latest by Bank of America, once the biggest mortgage lender and now No. 4, to prioritize who it serves as the firm scales back mortgage operations. Last month, the company suspended refinancings that allowed homeowners to extract cash from their properties. Bank of America’s policies may be reversed if demand falls or as more employees are added, one person said.
“We’ve had strong demand,
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