According to USA Today, Bank of America will soon begin offering no-fee mortgages. That means they won’t charge for applications, appraisals, loan originations, title insurance, flood certifications, and even private mortgage insurance.
I was thinking about this last night, and it occurred to me that this is simply the next step in a pyramid scheme. Lenders have to attract an increasing number of buyers as foreclosures increase. While the lenders assumed the risk of the first batch of risky mortgages, they want to be bailed out by attracting more customers.
Don’t be fooled, the bank is not doing this out of the goodness of its heart. Bank of America admitted they won’t be offering the lowest rates for these mortgages. What they’re losing in fees (about $3,250 for each $200,000 loan) will be made up for in interest payments.
Updated February 6, 2012 and originally published May 8, 2007. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.