No Fee Mortgage Offered By Bank Of America
Too good to be true? Many are wondering this, after Bank of America announced on Tuesday that it would offer a "no fee" mortgage loan. According to an article in the Baltimore Sun, this mortgage gets rid of a whole host of traditional fees and charges, including application fees, appraisal fees, and closing fees in addition to a number of customary charges for such things as underwriting and title insurance, and yet still offers a competitive interest rate.
I wonder if someone at Bank Of America read my post on banking?
All these charges that we see in the mortgage business are all relatively new developments in the last 20-30 years. Before that, a lender made its money on interest, plain and simple. The process of applying for the mortgage was how they sold you on being a customer; it wasn't a charge to you! After all, banks and lenders were expected to make more than enough money on the interest alone. In fact, based on interest alone, each mortgage is worth potentially hundreds of thousands in interest money for the lender.
That's not peanuts, folks.
Somehow, perspective on the lending business changed in the push for more and more profits from banks. Profit stopped being calculated on the business overall, and each "unit" was supposed to become its own "profit centre". As a result, all kinds of new charges started appearing in banking and lending. These charges have proliferated and grown in size, at an astonishing rate. I am constantly being annoyed at the arrival of yet another "customer service" letter that tells me how my bank is doing me a favour by charging more for yet another aspect of my interaction with them. Every year, I pay more for yet another "service" that is something the bank should provide to me automatically in order to keep my business.
If Bank of America is really offering a clear, straightforward, no extra charges mortgage -- this is the best move I've seen in banking in a long time. This is really listening to the customer. No extra charge is in a customer's benefit; service fees and charges benefit the lender and the lender's bottom line. A real reduction in these kinds of charges would be the most innovative and customer friendly change since my parents bought their first home, when there wasn't any such thing as all these fees. Bank of America could end up with a flood of new customers, as people realize that customer service isn't something they should have to pay for.
Sometimes, it's good to do things the old way.