While the deal is aimed at compensating Fannie Mae, it has big implications for many BOA mortgage customers: In coming months, they will be notified their mortgages will be serviced by someone else.
BOA, which has been pulling back from several areas of mortgage lending, got approval from Fannie Mae to transfer certain mortgage servicing rights to two firms, Nationstar Mortgage of Lewisville, Texas, and Green Tree, part of Walter Investment Management Corp .
Nationstar Mortgage, which specializes in mortgage servicing, agreed to acquire $215 billion in servicing rights from Bank of America for about $1.3 billion.
Executives of Nationstar, whose shares trade on the New York Stock Exchange, said in a conference call Monday they expect to take over the massive pile of mortgage servicing rights in a series of steps over the next nine months. In the meantime, BOA will continue to handle them.
Specialty servicers like Nationstar focus on customer outreach to try to reduce losses. But changing mortgage servicers can often be a bumpy experience for bank customers.
Both Bank of America and Nationstar promised a smooth transition.
“Servicing of accounts acquired will be transferred throughout the year in a manner that will ensure a smooth transition for our customers,’’ Nationstar told The Miami Herald in a statement.
New consumer mortgage rule
The fledgling Consumer Financial Protection Bureau, which was born of the 2010 Dodd-Frank Act, unveiled its first major rule regarding home mortgages Thursday, laying out standards for “qualified mortgages,” which require that lenders determine a customer’s “ability to repay.”
In the financial crisis that culminated in the near collapse of the U.S. banking system in 2008, many homeowners had signed up for mortgages that they couldn’t afford or that had risky and deceptive terms.
The agency’s rule, which becomes part of the Truth in Lending Act, is aimed at protecting homebuyers from greedy lenders — and from their own flawed skills in personal finance.
Under the rule, which takes effect in a year, lenders must consider eight factors to determine a borrower’s “ability to repay.”
Those include: employment status; current monthly income or assets; the monthly payment; other loan obligations, mortgage-related obligations; debt-like alimony and child support; debt-to-income ratio, and credit history. And lenders have to verify the information using third-party records.
While some bankers complain the rule will discourage mortgage lending and keep credit tight, consumer advocates mostly praise the measure as a major step in the right direction.
The issuance of a clear rule on safe lending should only encourage banks to make mortgages, said Kathleen Day, a spokeswoman for the Center for Responsible Lending in Washington, D.C.
“The good news for consumers is they ought to find it easier to walk up to a bank or mortgage company and get a loan,” Day said. “The biggest excuse for not lending has been removed.”
Under the rule, “no-doc” loans that don’t require proof of a borrower’s income or assets are excluded.
A “qualified mortgage” also can’t have toxic features such as interest-only or balloon payments, terms exceeding 30 years, or negative amortization, in which the balance increases over time instead of dwindling.
And a “qualified mortgage” generally can’t have points or fees exceeding 3 percent of the loan amount.
A major element is the monthly payment can’t be more than 43 percent of a borrower’s monthly income. And lenders can’t use low teaser rates to calculate whether a consumer can repay a loan.
In a concession to banks, the consumer agency agreed that during a transitional period for the new rule, loans exceeding the debt-to-income ratio can be considered qualified so long as they meet the other criteria.
Banks got something else out of the new rule, too: A “qualified mortgage” carries a safe-harbor provision. That means banks that have followed underwriting rules generally will be shielded from consumer claims that the loan was improper.
“The banks got some privileges they didn’t have before,” said Taylor. “We thought they were unnecessary and undeserved, a concession to the lenders.”