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If you have a mortgage with Bank of America (NYSE: BAC) and want to refinance, don't bother.
You are not worth the bank's time. Or at least I wasn't.
That's what I learned first-hand last week when I called Bank of America to refinance a home mortgage I've had with them for years.
My jaw practically hit the floor when Alejandro from BofA's mortgage department told me this over the phone.
"Because of excessively high demand," Alejandro said, "we can't accept your refinancing application. But we can take a reservation and have an agent call you in 90 to 120 days."
Huh?…You can't be serious.
Bank of America |
I really have to wait three or four months to even apply for a lower interest rate when I've been an existing customer for years?
Yeah, I bet, I thought to myself…
They'll call me when interest rates are much higher or when BofA works its way through its part of the $25 billion robo-signing settlement reached over its abuses in the foreclosure process.
Of course, all of this is after BofA received $45 billion in taxpayer bailout funding.
And after they reportedly shifted the risks associated with $75 trillion in derivatives from its investment banking and trading units to BofA's depository arm, a unit flush with FDIC-insured deposits.
But that is another story for another day.
How Bank of America Treats its Customers
Suspecting something wasn't quite right, I made a second call to BofA to inquire about a new loan.
Not ten minutes later I was put through immediately to an underwriter who was all too happy to help a new, unknown prospect – a.k.a. me – take on more debt. Imagine that.
I called BofA for a comment on this bothersome situation and spoke with Terry Francisco, VP of Corporate Communications, who sounded genuinely surprised. Not pleased mind you, but surprised.
I feel for the guy. It must be tough to work for a company like Bank of America that is under tremendous pressure from all sides. And this article isn't going to help.
Terry kindly sent me a statement noting that the "random reservation" system that resulted in my refinancing application being summarily denied before the underwriting process got started only "impacts consumers inquiring about a refinance who do not have a Bank of America deposit or investment account relationship."
And that Bank of America "will not sacrifice customer satisfaction for short-term volume."
Apparently having a mortgage in good standing with Bank of America doesn't qualify me as a customer.
Through its actions, Bank of America demonstrated that it is evidently willing to screw pre-existing customers like me who have exemplary payment history, near perfect credit, sufficient assets and income by making it hard to get out of my existing higher rate loan.
Yet, the bank remains perfectly willing to take on new loans at lower rates from customers with whom they have no prior relationships and who represent entirely new risks.
Talk about an anti-marketing message…I can imagine the ad copy now, "if you're considering refinancing your mortgage, don't bother calling us…we'll call you when we're darned good and ready."
Good luck with that.
So if you have any doubts as to where the big banks' priorities are at the moment, my experience with BofA last week ought to dispel them quite clearly.
The direct transfer of risk to taxpayers like you and me without regulatory approval and without public input continues unabated.
Long story short, I'll be taking my business elsewhere.
Three local lenders, incidentally, called me back less than an hour later saying they actually want my business. How refreshing!
Bank of America is the Tip of the Iceberg
Unfortunately, I don't think what happened to me is an isolated incident. And I know that I am not alone because my inbox has been filled with messages from Money Map Report subscribers sharing similar experiences with Bank of America.
Banks like BofA lost their moral compasses a long time ago.
The interests of customers like me have been sidelined for so long that profits at the expense of consumers has become the mantra.
The muppet-gate story at Goldman Sachs last week is just part of a much greater canvas.
Case in point, Lamont Black and Lieu Hazelwood – both of whom are Federal Reserve researchers – recently confirmed what I've told you was going on all along in a just released report called The Effect of TARP on Bank Risk-Taking.
Big banks like BofA actually took on greater risks after being bailed out without lending to consumers and businesses.
Not only that, but Black and Hazelwood noted that the level of business loans issued by big banks declined dramatically after they received taxpayer subsidized bailout funding relative to banks that didn't.
How?
Exactly as I said they would…by underwriting higher risk, higher interest rate loans all while not increasing loan volumes (since volume was the figure the watchdogs were watching).
In other words, big banks knowing and willingly took on greater risks while not accepting greater responsibility to lend to the very taxpayers who had just bailed them out.
As to whether that was conscious or deliberate, lawyers will debate that for years. I have my opinion. No doubt you have yours.
Long story short, thanks to the damning report from Black and Hazelwood, it's no wonder lending hasn't recovered and credit remains tight. Despite lots of lip service, big banks don't give a rats *ss about Main Street and its people, its small businesses, its home buyers nor its homeowners.
Local banks and credit unions are a different story and it's no wonder that many are enjoying a fresh influx of deposits with stories like mine portrayed in excruciated detail all over the Web.
What happened?… I wish I knew.
Big bankers used to be community pillars. They were the guys you could count on to do the right thing. They were heavily involved at every level from helping local businesses to sponsoring the neighborhood baseball diamond.
They cared about their customers and aligned their interests with ours. They were trustworthy.
Now, they're morally bankrupt.
Come to think of it, I haven't heard a single banking executive say thank you to the taxpayers for saving their way of life and their profligate ways…and still haven't. I haven't even heard an apology for the mess they created.
No wonder people call'em "Zombie" banks.
If you've had a similar experience with Bank of America (or any other lender for that matter), I'd like to hear about it. Please write to me at keith@moneymorning.com and share it.
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About the Author
Keith is a seasoned market analyst and professional trader with more than 37 years of global experience. He is one of very few experts to correctly see both the dot.bomb crisis and the ongoing financial crisis coming ahead of time - and one of even fewer to help millions of investors around the world successfully navigate them both. Forbes hailed him as a "Market Visionary." He is a regular on FOX Business News and Yahoo! Finance, and his observations have been featured in Bloomberg, The Wall Street Journal, WIRED, and MarketWatch. Keith previously led The Money Map Report, Money Map's flagship newsletter, as Chief Investment Strategist, from 20007 to 2020. Keith holds a BS in management and finance from Skidmore College and an MS in international finance (with a focus on Japanese business science) from Chaminade University. He regularly travels the world in search of investment opportunities others don't yet see or understand.
It seems that I never learned to think very well (over 30 years as a successful electrical engineer, imagine that). I've had investment resources for about three years and found that I don't 'think money' and so for that reason I appreciate folks like Keith F-G who reason economic conundrums quite lucidly. I'd like to thank Keith for walking us through the BofA story and helping me to see the what is really happening here. Interestingly enough, I think that the average joe, without much thinking about it, would take his mortgage elsewhere. There must be payoff in writing riskier paper… I know, gubmint! jch
This is a superb example of what happens when one doesn't allow the economic organism to fix the problems that lead to economic crises. The government and central bank, by stepping into the natural economic order, have taken what should have been an extremely painful realignment—that they created to begin with through cheap lending along with misguided tax incentive policies—and pushed it out further into the future, making things even worse when the ultimate day of reckoning finally lands upon us.
To me, at least, it appears to be more and more obvious that economic cycles can take anywhere from fifty to over one hundred years to play out. The current and somewhat unique global super-cycle being engineered by central bank tinkering with fiat currencies can only lead to extremely bad outcomes at some point in the future.
Globalization, digital currency creation, and the naïve faith people seem to have in American interventionist capitalism seem to have sustained a highly imbalanced system for an inordinate amount of time. This has led to economies that are so highly distorted with capital misallocations that something catastrophic is lingering in the air. Everyone can smell it; even the most optimistic of economists can feel its presence; yet no one can quite figure out from where the stench is actually coming, or exactly what place in the body of our living dead economy is decaying the fastest.
Your story, along with Greg Smith's op-ed piece in the New York Times a few days ago, seem to show quite clearly the symptoms of the financial collapse of 2008 were the system's way of trying to cleanse the rot out of an organism that had become rife with perverse incentives and moral hazards that are now even more gargantuan in size and scope than when the worldwide economy tried to last heal itself.
If we proceed along our current course, with the arrogance of an alchemist that believes he can create gold out of a concoction of chemicals, the economic organism will certainly teach us a terribly painful lesson in humility. After all, there is no panacea, as any system that has overindulged in the past will inevitably be forced to pay for those abuses in the future.
Something isn't only wrong with Bank of America and Goldman Sachs. Things are wrong all over the place. Artificial liquidity has simply papered over fundamental economic problems…for now.
Well said.
Bank of America rips off their customers. I had an incident with their debit card where the magnetic strip had worn out . The card was six months short of automatically being replaced at no fee but since I called to have it replaced as the magnetic strip had worn out they sent me a new card and charged a $5.00 replacement fee and extended the expiration date to what the new free replacement card would have been. I called customer service but they did not care and would not reverse or credit the $5.00 replacement fee. I see fraud in this situation where the customer who has to use their Debit card and make them money by using it has to pay for the replacement. times my situation by the thousands of customers that run into the same situation and it adds up to a handsome profit for Bank of America at the cost of the customer.
With the value of real estate in the U.S. tanking, any new loans that a bank makes will be based on the new, lower value of the real estate it is loaning against. That would definitely improve their risk position. I'm guessing that the bank is trying to dump any existing mortgages any way that it can, including puting you on a long waiting list in hopes that you will find other financing in order pay off your original loan to them. Any existing mortgages won't have the same debt to equity ratio as the new loans.
B of A is a clown parade. Read Crash of the Titans…an excellent book by a guy named Greg Farrell, for insight.
If ever a company deserved to bite the dust, this is it….for the Merrill Lynch acquisition alone, much less their robo criminality, debit card fee scheme, callousness disregard for customers, and serial stupidity. If you don't hate these people and hope they rot in hell, you simply aren't paying attention.
But hey, Uncle Warren has a stake, and he's the croniest of the cronies, so they'll be saved from extinction.
"And after they reportedly shifted the risks associated with $75 trillion in derivatives from its investment banking and trading units to BofA's depository arm, a unit flush with FDIC-insured deposits. "
$75 trillion in derivatives? where this crazy number comes from? This is an approximate amount of ALL world derivative market but not BoA alone. However, on other issues Keith is right.
Actually the total notional amount of outstanding over-the-counter derivatives is actually $708 trillion as of June 2011, according to the Bank of International Settlements (http://www.bis.org/publ/otc_hy1111.htm).
And, Keith nailed it on the total value of Bank of America derivatives being $75 trillion, as recently reported by Bloomberg (http://www.bloomberg.com/news/2011-10-18/bofa-said-to-split-regulators-over-moving-merrill-derivatives-to-bank-unit.html) explains the Back of America
Just a question.
Is Bank of America holding the mortgage, or only the servicing agent ?
Makes a lot of difference in how they handle any inquiry for refinancing.
My failed dealings with BofA was in attempting to obtain a mortgage. The hang-up was this:
• I pay spousal and child support based upon my income.
• a large part of my income is stock based (options and RSUs)
• BofA reviewed the last three years and averaged the amount of spousal and child support I paid, and then assumed that I would pay the same going forward
• But, they do not count stock options and RSUs toward future income considerations
Thus, they assume I will pay the same support as I have been but without the income to back it up. The support I pay is a scale, if I make less, I pay less, and vice-versa.
I asked BofA "How would I ever pay support on income that I never have?"
Their response: "It's the prudent assumption."
I qualified elsewhere with people who know how to think.
as long as anyone does business with any of these big banks they have no justification for complaint including and especially knowledgeable people like you KEITH shame on all of you
@Alex, Keith is correct on this, too. It is well explained here:
http://www.nakedcapitalism.com/2011/10/bank-of-america-deathwatch-moves-risky-derivatives-from-holding-company-to-taxpayer-backstopped-depositors.html
I have seen various figures for the total notional value of derivitives, globally, and my impression is that nobody knows just how big that is. This quote is from the Bank of International Settlement's web site. Even they apparently don't know the entire size of the market – they only record what they have been told about. Still it seems they know about $708T in OTC derivitives.
"After an increase of only 3% in the second half of 2010, total notional amounts outstanding of over-the-counter (OTC) derivatives rose by 18% in the first half of 2011, reaching $708 trillion by the end of June 2011."
Why Buffett invested in BofA is beyond me. He seems to think highly of Jamie Dimon, CEO of JP Morgan, too. But BofA, JP Morgan, Goldman – all the Too Big To Fail Banks (except Wells Fargo) hold many $Trillions in derivitives. Does Buffet think derivitives are no longer weapons of financial self-destruction?
They talk about the drug Lords!!. This operation is headed up by high priced fat cats that no interest but their own hides and are worth nowhere near what they are getting. I see a change in most of the Canadian banks, where customers are starting to become people and maybe should be a template for the large aggogant US banks
time to break up the big banks. BAC merger with nations bank should have never happened. also many of the other big bank mergers were disasters which finally happened. many hard working employees lost long term jobs while top excecutives received golden parachutes.
I got away from BOFA a long time ago and saw all the signs even then !! After giving this bank more information on myself that would make a 1960s communist proud, they informed me that I couldnt cash a check that was written to me !! Not because of lack of funds or any normal reason, I was at a loss as to why they couldnt cash the check. My response was from a lady who acted like the PR person who greets you at Wal-mart. With a smile of understanding, She promptly told me that they had 52 reasons why they couldnt. I in return told her that I didnt need 52 B#$@S^%$ reasons, all I needed was just one good one !! Well–she continued to give me some foreign country bank jargon jibberish that would take Nasa to figure out, I quickly asked to be lead me to any desk in order to take my money and leave that BS alone. She forgot the fact that more than 15 people had been standing in line who had already spent 20 minutes in there because they only had one person working !! I wish that I had a camera that day as the other 15 people followed me to the desk to close their accounts !! Having just moved recently to a small town, it was very refreshing to see how well I was treated not only as a customer but that now–I was part of a community !! We are on a first name basis and I feel in control of my assets but I also feel the trust I put into someone else taking care of MY MONEY !! I would not give any big bank a wooden nickel at this stage of the game !! Next time–they will just freeze your assets and let your phone talk to their phone !! Who you gonna call–Ghostbusters ? You might just as well !!! If your still naive enough to think that your money is safe or that they give a damn about you then I have some fine swamp land in alaska I would love to sell you !!!
It is unbelievable that somebody who speaks about millions, billions, and trillions has problems with
a motgage. YOU SHOULD HAVE NO DEBTS. I know, you will tell me that it gives you deductions,
but still………. As another reader quotes SHAME ON YOU ALL money gurus who are not wealthy, this is the least I would expect from somebody giving me advise.
We have our mortgage at bank of American,they bought our old co. out. Any suggestions as to where to go for a refinance? We would like to lower our interest rate. If we would be treated like the people in your stories then I don't even want to approach them.
In contrast, my "small town," ( 30,000 pop.), B of A branch is all over me, wanting me to refinance. I have had both savings and checking accounts with them for years, and that is likely the reason.
Problem is for me that they will give me a cash back loan on the equity I have in my home, but the interest rate would be prohibitively high. I put a large percentage down payment on a house (after the crash) in order to get out of holding cash, but I was considering investing in something with a better upside than real estate.
I find their local branch gives very good service, but the organization really screwed over my son who lost his house.
I am presently looking at removing what remains of my savings account and buying silver with the funds.
I guess what I am saying is that I am satisfied with the way the branch handles my accounts and I find the online checking very useful. I just keep my exposure to their poor corporate policies to a minimum and take advantage of the good stuff.
DC
I had the exact opposite experience with B of A. They politely and happily accepted my Refi request and it will close next week. Can't say it was the fastest proceess ever but it did meet their stated timeframes.
I am currently going on 120 days of trying to refi my current loan with BOA. They are the worst customer service I have ever experienced. I have had to resubmit because they said all my paperwork expired after I have been sitting by the phone waiting to hear from them. Unbelievable experience, can't even begin to explain. Do not go through BOA!!!!
My story is EXACTLY the same, Sal. I am beside myself.
they do not want to refinance existing loans BECAUSE THERE ARE NONE! The fact is that if they go to refi a loan that doesn't exist then you will see this upon the pay off demand if you ask properly. There cannot be an existing payoff. They don't want to deal with their own fraud! They would rather "steal" your home if they can if you fall on hard times. The facts speak for themselves. Now we have banks suing themselves! Think about it…new customers will create NEW credit collateral that they can show as LEGAL, yours most likely isn't..just my thoughts.