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Fear Lengthens Process Times for Bank of America Mortgages

November 14th, 2011 3:33 PM by Lehel S.

By now you've seen the stories about Bank of America losing some of its top loan producers who—among other things—are griping about the painfully slow underwriting and closing times at the troubled residential lender.

Rest assured, those complaints are not without merit. B of A has some of the longest processing times in the industry, and it's hardly a secret.

Two weeks ago when I asked the bank for a rough idea of how long its takes to close a loan (from application to the closing table) it provided a figure of 90 days.

Then, about a day later, I received an update: it only takes 60 days.

A spokesman for the bank seemed quite aware that neither number is impressive and added, “We are working on both short-term and long-term measures to improve our processes, which will enable us to close loans sooner...” (It didn't help that earlier in the year the bank laid off thousands of processors and underwriters.)

Meanwhile, its LOs must contend with losing customers and commissions, while competing against more nimble firms such as CMG Mortgage of San Ramon, Calif.

CMG president Chris George boasts that his midsized nonbank can close loans in at least half that time, if not better. “For conventional purchase loans we can close in 28.5 days,” he said. “For refis on a conventional (loan) it's about 31.8 days.”

The reason for the measurement in decimal points is obvious to any mortgage banking veteran. For a nonbank like CMG, the longer its warehouse lines stay open, the more it has to pay to the bank supplying it with credit. Translation: The faster it can turn product, the more its profits increase.

Paramount Residential Mortgage Group, Corona, Calif., is similar to CMG in turn times. “We can close loans in under 30 days all day long,” said CEO Paul Rozo. “Our retail unit can do it in 21 business days,” he said. “But short sales take a little longer. We're a purchase shop only.”

And what exactly does PRMG do with its production? According to Rozo, the nonbank upstreams its production to Wells Fargo, and even B of A.

This means B of A is actually competing against firms on the retail side that can beat it on turn times, while another unit of the company supplies liquidity to that competition through a correspondent relationship.

Of course, this won't be happening for much longer since Bank of America is in the process of exiting the correspondent channel.

In all fairness to B of A, there's a good reason why it takes so long for the company to close a loan. Stung by loan buybacks from its Countrywide Financial Corp. acquisition, it wants to make sure that going forward no new problems arise.

Sources that have worked at B of A said Fannie Mae has put pressure on the bank to check and double-check its underwriting on all new loan production—hence the long processing times.

One former B of A LO, discussing his tenure at the company, said by being so cautious the bank is burning its bridges to Realtors and homebuilders who want quicker turn times. The LO, requesting his name not be used, said the real estate community has turned cautious on the bank, “making it impossible to build relationships.”

Posted in:General
Posted by Lehel S. on November 14th, 2011 3:33 PM

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