I sure hope they're getting a lot of credit-card interest, because it's difficult to see how the mortgage side is contributing to the bottom line.
In March 2009 we refinanced our rental property. This happened as a fluke when our mortgage broker (who's become a good friend with our serial refinancings) pointed out that BofA was only asking 4.625% for their investor loans. When NFCU refused to modify their 5.5% loan terms, we kicked them to the curb and went with BofA.
If I'd ever been a BofA investor, the refinancing process would have concerned me about their alleged revenue model. Back in 2009 (and perhaps still today) every BofA mortgage applicant got a 70-page bound 8.5"x11" one-pound disclosure book warning them of all the characteristics of every one of BofA's loans. This was sent through the snail mail at first-class postage rates, not handed out by the broker or e-mailed or downloaded. They made no attempt to limit the disclosure to the actual loan we'd applied for but rather had you wade through pages of boilerplate about ARMs and HELOCs when all you wanted was a 30-year fixed. At the end was an intimidating acknowledgment to be immediately signed and returned or BofA would never trust you with their money. (It was supposed to be submitted with our application, but nobody wanted it because we applied online. Our mortgage broker thought it was pretty funny, too.) But, hey, credit was tight and mortgage banks were skittish, so we bit our tongues and submitted all the paperwork they asked for.
At some point BofA asked for setup info on our taxes/insurance escrow account. When I declined the honor they said that they'd charge an extra 0.25% mortgage interest if we didn't let them pay our property taxes & insurance. I haven't been forced to fund an escrow account for over 20 years but, hey, credit was tight and banks were skittish.
Once we got the loan we set up automatic monthly billpay through our NFCU account. It took me at least six months to get BofA to shut off the snail-mail assault of payment coupons, mailers, and other upselling. Even today we get monthly e-mail notifications that our mortgage payment is due, and another monthly e-mail notification that it's overdue (it doesn't interface with NFCU's billpay software). But at least they're getting their money when they want it.
Today we got a four-page (first-class) letter explaining the concept of "escrow analysis". For the last year they've been maintaining roughly a $1000 balance in the escrow account, and this month they've discovered that it's a little higher than necessary. After four pages of explaining their process, they concluded that they'd be lowering our monthly payment by $7.59 and sending us a $77.67 rebate check. Note that the check will be hardcopy via snail-mail instead of an EFT to the account they've been getting our payments from. Any bets on whether that $7.59 adjustment triggers another hailstorm of snail-mail payment coupons, mailers, and upselling inserts?
I don't have a financial MBA and I'm not a highly-paid banking exec, but I can do math. Let's pretend that those fiscal geniuses have been scarfing a 3% spread off our escrow account. (I'm skeptical, but it's a nice round number.) That entrepreneurial initiative has earned them $30 in 12 months. Over the last year they've wasted at least $15 in first-class postage to send me a couple dozen unwanted pieces of snail mail, and I'm sure they sent another three hardcopy checks for our property taxes and insurance. All of these addressees (including me) handle electronic payments but that's apparently "too hard". (That's assuming they pay the insurance company up-front, which they seem to do, although I used to spread the payments out over six months.) Then, instead of tightly clutching the remaining $15 in their hot little hands (or perhaps disbursing some of it as a dividend to their overly patient shareholders) they developed an accounting system to conduct four-page escrow analyses which would force them to adjust their payments by less than 1% as well as spewing out another hardcopy snail-mail check. Do they think that their software programming, installation, maintenance, & upgrade costs are less than $15 per account?
Perhaps they make it up on volume.
If you're a Bank of America stockholder then I hope you're getting a really good dividend yield... and this time they're not going to cut it!
In March 2009 we refinanced our rental property. This happened as a fluke when our mortgage broker (who's become a good friend with our serial refinancings) pointed out that BofA was only asking 4.625% for their investor loans. When NFCU refused to modify their 5.5% loan terms, we kicked them to the curb and went with BofA.
If I'd ever been a BofA investor, the refinancing process would have concerned me about their alleged revenue model. Back in 2009 (and perhaps still today) every BofA mortgage applicant got a 70-page bound 8.5"x11" one-pound disclosure book warning them of all the characteristics of every one of BofA's loans. This was sent through the snail mail at first-class postage rates, not handed out by the broker or e-mailed or downloaded. They made no attempt to limit the disclosure to the actual loan we'd applied for but rather had you wade through pages of boilerplate about ARMs and HELOCs when all you wanted was a 30-year fixed. At the end was an intimidating acknowledgment to be immediately signed and returned or BofA would never trust you with their money. (It was supposed to be submitted with our application, but nobody wanted it because we applied online. Our mortgage broker thought it was pretty funny, too.) But, hey, credit was tight and mortgage banks were skittish, so we bit our tongues and submitted all the paperwork they asked for.
At some point BofA asked for setup info on our taxes/insurance escrow account. When I declined the honor they said that they'd charge an extra 0.25% mortgage interest if we didn't let them pay our property taxes & insurance. I haven't been forced to fund an escrow account for over 20 years but, hey, credit was tight and banks were skittish.
Once we got the loan we set up automatic monthly billpay through our NFCU account. It took me at least six months to get BofA to shut off the snail-mail assault of payment coupons, mailers, and other upselling. Even today we get monthly e-mail notifications that our mortgage payment is due, and another monthly e-mail notification that it's overdue (it doesn't interface with NFCU's billpay software). But at least they're getting their money when they want it.
Today we got a four-page (first-class) letter explaining the concept of "escrow analysis". For the last year they've been maintaining roughly a $1000 balance in the escrow account, and this month they've discovered that it's a little higher than necessary. After four pages of explaining their process, they concluded that they'd be lowering our monthly payment by $7.59 and sending us a $77.67 rebate check. Note that the check will be hardcopy via snail-mail instead of an EFT to the account they've been getting our payments from. Any bets on whether that $7.59 adjustment triggers another hailstorm of snail-mail payment coupons, mailers, and upselling inserts?
I don't have a financial MBA and I'm not a highly-paid banking exec, but I can do math. Let's pretend that those fiscal geniuses have been scarfing a 3% spread off our escrow account. (I'm skeptical, but it's a nice round number.) That entrepreneurial initiative has earned them $30 in 12 months. Over the last year they've wasted at least $15 in first-class postage to send me a couple dozen unwanted pieces of snail mail, and I'm sure they sent another three hardcopy checks for our property taxes and insurance. All of these addressees (including me) handle electronic payments but that's apparently "too hard". (That's assuming they pay the insurance company up-front, which they seem to do, although I used to spread the payments out over six months.) Then, instead of tightly clutching the remaining $15 in their hot little hands (or perhaps disbursing some of it as a dividend to their overly patient shareholders) they developed an accounting system to conduct four-page escrow analyses which would force them to adjust their payments by less than 1% as well as spewing out another hardcopy snail-mail check. Do they think that their software programming, installation, maintenance, & upgrade costs are less than $15 per account?
Perhaps they make it up on volume.
If you're a Bank of America stockholder then I hope you're getting a really good dividend yield... and this time they're not going to cut it!
