Bank of America Looking to boost Market Share

by admin, November 30th, 1999 | No Comments

Looking to boost market share when loan demand has slowed, Bank of America Corp. has rolled out a no-fee mortgage aimed at home buyers.

Under the program, Bank of America won’t charge borrowers for loan applications, title insurance, appraisals and flood certifications or require them to get private mortgage insurance. Typically, borrowers who don’t put 20% down must get mortgage insurance or take out a “piggyback” loan, which combines a mortgage with a home-equity loan.

Borrowers must still pay some costs, including property insurance, property taxes, recording taxes and other “services voluntarily chosen by the customer,” such as home inspections.

The no-fee mortgage program is the latest effort by Bank of America to use what the bank calls “disruptive strategies” to gain market share in businesses where it has been relatively weak. Last fall, the bank eliminated online stock-trading fees for millions of customers with at least $25,000 in deposits. The bank, based in Charlotte, N.C., is the nation’s sixth-largest mortgage lender, according to Inside Mortgage Finance.

Bank of America executives say it is imperative to get more of existing customers’ business, in part because a federal regulatory cap hampers its ability to grow by its traditional strategy of buying other U.S. banks. The typical mortgage customer has more than five other accounts with the bank and is less likely than other customers to switch lenders, says Floyd Robinson, president of the bank’s consumer real-estate business.

The no-fee loan is likely to be “a very attractive proposition for many cash-strapped home buyers,” says Greg McBride, a senior financial analyst with Bankrate.com. “But it doesn’t eliminate the need to shop around.” In comparing mortgages, borrowers need to look at both the annualized percentage rate and the closing costs, he says. Closing costs average $3,024 on a $180,000 mortgage.

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