Thursday, November 27, 2008
Bank of America's "Paperless Loan" More of the Same
Bank of America is still accepting stated income loans with a slight product terminology change, the loans are called "paperless" in order to give them a Greenwashing. I spoke to a builders representative from Bank of America that converted 31 of about 54 files to paperless to circumvent the automated declines. Per the retail rep, she reconfigured the income and assets in order to get the files approved.
Seems like these are the express loans from either Fannie or Freddie. If banks are still making these loans through their retail channel it really confirms that the problems still exist and that its not the broker channels that are corrupt- its the management of the direct lenders that are promoting unit volume over quality.
Mortgage brokers get a bad wrap for the activities of the past but brokers don't create the underwriting guidelines or develop the products that are offered to the public. If a bank wants to offer paperless/stated loans then the bank should do so through their own portfolio and stop dumping them on the GSE's and the taxpayer. There is an obvious need for the stated loans, I just think these types of loans need to be kept in-house in all cases as they used to be in the 90's.
A bank will rarely do a QC of their own files but can easily pull the 4506 and require use of approved appraisers which would weed out 90% of bad deals that any broker might submit.
