Home Mortgage Refinancing Guide

Bank of America recently announced that their no fee mortgage is now available nationwide. Are no fee mortgages simply a marketing gimmick? Before you rush over to the nearest branch there are a few things you need to know about bank originated mortgage loans.

No cost mortgage loans come with above market interest rates to cover the lender’s origination fees and sometimes closing costs. If you read the fine print on Bank of America’s offer they say traditional closing costs still apply; however you will not pay the 1% fee typically charged by the company originating your loan.

The tradeoff is that you accept a higher than market mortgage rate for your loan. Remember the saying “There is nothing new under the sun?” Mortgage lenders have been running scams like this for years only they have a different name for it. When you take out a mortgage from anywhere other than a bank this markup is called Yield Spread Premium.

Mortgage companies and brokers mark up your interest rate because wholesale lenders pay a premium for loans with above market interest rates. They do this because mortgages with above market rates bring higher profits when the loans are sold to investors on the secondary market. Banks charge customers above market rates for the same reason; the difference with a bank is that there is no wholesaler involved with the transaction, only the bank.

Another problem with bank originated mortgage loans is that banks are exempt from the Real Estate Settlement Procedures Act that required lenders to disclose their markup and profit margin on your loan. The Banking Lobby spent millions of dollars romancing Congress to have the law changed so that they’re exempt. (The Republic is beautiful thing isn’t it?) This alone should leave a bad taste in your mouth and is reason enough never to refinance your mortgage with a bank. Bank mortgage rate sheets have this markup, called Service Release Premium, built into them and this should convince you to avoid your bank altogether.

If you are considering taking out a mortgage from Bank of America, there are several things you need to know about Bank mortgage loans that could save you thousands of dollars. Bank of America is currently testing a “no fee” mortgage that allows homeowners to take out a Bank mortgage without paying many of the closing costs associated with conventional mortgage loan.

What’s Wrong with Loans from Bank of America?

The problem with taking out a mortgage from Bank of America comes from the fact that they are in fact, a Bank. Banks are exempt from the Real Estate Settlement Procedures Act and are therefore not required to play by the same rules as other mortgage companies. If you take out a mortgage loan from Bank of America you will pay what’s known as Service Release Premium on your mortgage interest rate. Service Release premium is the markup of your mortgage interest rate by Bank of America in order to receive additional profit when they sell your mortgage on the secondary market.

If you agree to pay Service Release Premium with your Bank of America no fee mortgage, you will pay thousands of dollars every year in unnecessary mortgage interest. Because Bank of America is exempt from the Real Estate Settlement Procedures Act thanks to the Banking Lobby, the Bank is not required to disclose their profit margin on your mortgage loan. Bank of America is marketing “no fee” mortgages in an attempt to distract borrowers from the fact that Service Release Premium is built into their rate sheets. You should never consider a Bank of America mortgage loan if you’d like to avoid overpaying.

You can learn more about what’s wrong with loans from Bank of America, including costly mistakes you need to avoid, by registering for our free, six-part video tutorial.

Bank of America is currently testing a “no fee” mortgage in Washington State in an attempt to boost the sales of their mortgage products. Should you consider a no-fee mortgage like the one offered by Bank of America? Here’s the problem with taking out a mortgage loan from your Bank. Banks are exempt from the Real Estate Settlement Procedure Act (RESPA) that protects homeowners from abusive lending practices. The banking lobby spent millions of dollars to be excluded from disclosure legislation, and when RESPA became law, the banks were exempt.

Because banks are exempt from RESPA laws, you’ll never know how much the bank has marked up your mortgage rate. Bank of America is testing a “no fee” mortgage that does not require you to pay an appraisal fee, credit reports, and certain other costs they claim add up to $2,800. Bank of America does this to distract homeowners from what they’re doing with the mortgage interest rate. What is this slight of hand covering up? Banks routinely charge borrowers “Service Release Premium” on their mortgage interest rates.

What is “Service Release Premium?” Banks differ from other mortgage lenders because they fund mortgages with the bank’s money instead of reselling loans from a wholesale mortgage lender. When you apply for a mortgage from Bank of America, the bank knows the interest rate you would qualify from a wholesale lender; however, they mark your interest rate up for a profit when the Bank sells your mortgage on the secondary market. This markup of your mortgage interest rate by the bank is called Service Release Premium. Because Banks like Bank of America is exempt from the Real Estate Settlement Procedures Act, the only ones that know how much they’re overcharging homeowners are the banks.

Disclosure laws exist to protect homeowners from abusive lending practices. Why would you want to take out a mortgage loan from a lender that doesn’t have to play by the rules? You can learn more about your mortgage options, including costly mistakes to avoid by registering for a free six-part video tutorial.