Bank of America, which paid more in legal settlements tied to the U.S. housing collapse than any other company, will avoid easing mortgage standards even as regulators seek to expand lending, Chief Executive Officer Brian T. Moynihan said.
“You won’t see us start to expand our criteria much past what we’ve done today,” Moynihan, 55, said at a New York investor conference sponsored by Bank of America. “I don’t think there’s a big incentive for us start to try to create more mortgage availability where the customers are susceptible to default.”
Moynihan was responding to a question today about recent government efforts to improve access to credit in a market so tight that even former Federal Reserve Chairman Ben S. Bernanke couldn’t refinance his mortgage. Last month, Federal Housing Finance Agency Director Melvin L. Watt said that Fannie Mae and Freddie Mac will better define when those U.S.-backed companies would force banks to repurchase loans.
It’s part of a broader push by the Obama administration to unlock credit after banks had to repurchase billions of dollars of mortgages that were issued during the housing bubble. Many people seeking to buy their first home, and others deemed too risky have been shut out of the real estate market. JPMorgan Chase Co. CEO Jamie Dimon has bemoaned that credit was needlessly tight.
“I know that that doesn’t sound good for an instant housing recovery and faster housing markets, but it’s actually good because in the long term it keeps housing more fundamentally based,” Moynihan said.
Bank of America has paid more than $70 billion to settle disputes after the financial crisis, most of it tied to the 2008 takeover of subprime lender Countrywide Financial Corp. Moynihan has shuttered several businesses inherited from that takeover to focus on creditworthy customers who have checking accounts or other relationships with the firm.
“Having watched this play out over the last several years, watched the underlying consumer difficulties created by people borrowing more than they could pay back,” the Charlotte, North Carolina-based company’s priority is underwriting loans to people who can repay them, he said.
A customer without the means to make a down payment of at least 10 percent should consider renting rather than trying to buy a home, Moynihan said.