“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 to start to try to create more mortgage availability where the customers are susceptible to default.”
The bank's announcement comes just a few weeks after a national push to expand the credit box. Federal Housing Finance Agency Director Mel Watt announced a number of policy steps aimed at increasing mortgage credit availability at the Mortgage Bankers Association Convention & Expo in Las Vegas.
Additionally, Fannie Mae CEO Timothy Mayopoulos said the government-sponsored enterprise will soon begin offering a 97% loan-to-value mortgage. Freddie Mac is not too far behind.
Yet Moynihan stands in direct opposition of this. He said at the conference that a cusomer without the means to make a down payment of at least 10% should consider renting rather than trying to buy a home.
“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.
Meanwhile, Fannie Mae’s third-quarter Mortgage Lender Sentiment Survey predicted that large lenders would be the first banks to fully step up and open the credit box.
“Larger lenders are expecting to tap into the non-GSE-eligible and government loan market to maintain or grow their market share and offset their anticipated slowing mortgage demand as the peak spring/summer selling seasons are coming to an end,” said Doug Duncan, senior vice president and chief economist at Fannie Mae.
And although Citigroup (C) and Bank of America (BAC) announced in September that they would start to offer mortgages at discounted interest rates as part of their efforts to help borrowers with low incomes or subprime-credit histories, Bank of America's mortgage expansion is not likely to go too much further from there.
Bank of America recently paid more than $70 billion in settlements toward disputes that arose after the financial crisis, and there is currently a $16 billion settlement on hold as the big bank push for relief from the Securities and Exchange Commission.