Los Altos Real Estate Blog

I've been told by a west coast agent that Bank of America declined a buyer's loan on a short sale that appraised OVER the sales price.  I've been told by an east coast agent that Bank of America has declined a buyer's 203K loan for no discernable reason.  They've been cited as one of the worst banks to deal with in the State of California and have a track record of glaring issues with foreclosures, short sales, and even normal loans.  Agent after agent reports issues with closing BofA loans.  They've pulled out of...

• the reverse mortgage business
• the wholesale mortage business
• looking at leaving the correspondant mortgage business
• what's next?

They've come under the scrutiny of the Fed for being overburdened with debt and numerous analysts and pundits have pointed out that Bank of America is severely undercapitalized.  The claims made by their proponents are that they're "too big to fail", which is a load of B.S.  Enron was considered too big to fail by many industry insiders and how'd that work out?  That's right, it failed.  I think BofA is on the verge of exiting the mortgage business and possibly on the verge of collapse for three reasons:

• They're taking longer to approve loans or not approving them outright for no reasons
• They've exited several aspects of the mortgage business already
• They're undercapitalized and are carrying too much bad debt (earlier acquisitions of other banks)

If they collapse, then what?  Does it going to be doom and gloom on the stock market?  Will interest rates suddenly rise or loans be impossible to get?  How about "none of the above"?  If BofA fails, it'll be done softly and with plenty of planning put into getting them back to solvancy or selling them off, in whole or in part, to other banks that are better run.  One other attractive possibility is this...

Government receivership!

Nationalize these buggers so they stop making risky loans, playing games with money, and inflating service costs with no added benefit to the consumer.  I know, it all sounds very "anti-capitalism" but the banks have shifted into speculative arenas to drive income without offering any real value to customers.  If the purpose of the bank is to transfer money, playing games with MBS and other areas isn't the way to do it.  I think "innovation" in the financial services industry is an oxymoron and we'd be better off if they just made loans with less regard for aggressive growth year over year.