Am I The Only One Still Confused by Bank of America's New Mortgage Offer

Yes, you must have seen it by now.  This almost too good to be true mortgage offer from Bank of America.  Heck the other day it was featured on Yahoo's home page with this great enticing heading.  "No fees.  No worries.  No, really.  Relax you've found the best mortgage deal."  Well I don't know about you, but whenever someone tells me trust me, I almost never trust them.  So, I clicked on the ad and got this very slick flash landing page with my own personal mortgage guide.  After this page, I am more convinced then ever that this offer is definitely something to not be relaxed about.

Now before I get slammed by BofA employees, what I am not writing is whether this is a good offer or not.  What I am writing is that with all financial dealings you should not be relaxed and you should worry about the details.  Let's take a tour through the flash page as I did and let's count how many times you should worry about the detail or as BofA says relax.

1. The page lands on the tab called Why No Fee Mortgage Plus and right in the middle of the copy next to the $0 Application fee and $0 Closing fees is a footnote number 1.  That's cause to worry first because it was so good why is there a footnote there?  BTW - see post continuation for a full copy of their terms.  The catch here on this footnote is this (if you are generous) This offer is available on applications for certain first mortgages from individuals to Bank of America taken after April 21, 2007, to purchase a 1-4 unit owner-occupied family residence or second home. You must be an existing Bank of America customer.
2. Next up on the same footnote is regarding the Close on Time Guarantee which has plenty of steps you need to take to qualify.  My favorite term is this which may or may not be good for you: You must lock your rate seven calendar days before the scheduled closing date
3. Finally on the front page is the Best Value Guarantee which again has you jumping through hoops including taking a survey with BofA, faxing your closing disclosure form as well as closing on your home with a new lender within 60 days after BofA first approved you for the mortgage.  Well, so much for getting $250 back, right?
4. In the bottom left hand corner is a neat ticker which shows how much America could have saved with this sweet offer from BofA.  You can't click to see how they calculate it but you can click on a tab at the top to See How Much You'll Save.  That's where you find footnotes 2, 3, and 4.   #3 represents 36% of all of my supposed savings even though as the footnote says, not every banks charges a loan origination fee.  Time to worry again. 
5. #4 footnote is next to a whopping $16,199.94 in PMI savings for me but the calculation shown in the footnote again worries me.  It shows that the base loan used a 0.311 point calculation; I've never seen a more confusing number plus the APR in the example seems high to me.  However, that is all relative, but needless to say, you should compare how your PMI savings matches up with their base loan calculation.
6. And finally, and this is my favorite one, the majority of the closing fee savings were based on a 2006 bankrate.com survey for the 50 states plus DC.  Another worry spot?  Sure, the survey was published on August 10, 2006 which means it was probably conducted as late as June 2006 which means the rates are practically a year old.

Is the offer the best one I've ever seen out there?  I have no idea.  I'm just as confused as I was before and reading through their footnotes causes me to definitely worry about the language on the marketing materials.  You know what else is missing that it looks like they tried hard to keep a few clicks away from the banner?  The mortgage rates for the certain first rates mortgages that qualify for the offer.  When I did a little digging using the WSJ for national rates, BofA's mortgage rates looked high to me for New Jersey.  I then clicked through to a more detailed loan calculation and I used BofA's assumed loan details from the link above ($150K, no PMI, 30 year fixed).  According to the results Bank of America's interest rate at 6.75% was tied for the highest on the chart and if you used  WSJ's calculated APR they had the highest APR.  I don't know if the APR is correct with BofA's new offer, because it has some fees in it, but then again there is a footnote for their new offer, so who knows.

As with any financial dealing you should read the fine print.  I did on this new Bank of America promotion and I'm just as worried about getting a mortgage from them as I did before this new offer.  When someone says trust me, that's when you should do your homework even more.  I wonder if their legal and compliance department is as concerned about fulfilling this offer as I am?

PardonMyFrench,

Eric

Bank of America's Full Disclosure of Offer:

No Fee Mortgage PLUS Terms & Conditions

The following is a summary of the Terms and Conditions. A complete copy will be provided to you prior to closing.

No Closing Fees

For customers who qualify, Bank of America will waive or pay all fees for services or products required by Bank of America in order to grant credit to the customer for the purchase of a primary residence. Fees do not include (and the Bank will not pay for): (1) taxes (including, but not limited to property taxes, recording taxes, document stamp taxes, intangible taxes or other similar taxes); (2) interest, including but not limited to prepaid interest or discount points; (3) fees related to owning the home and not directly related to the granting of credit, including but not limited to property insurance (e.g., flood insurance and hazard insurance), homeowner's association fees, special assessments and other similar fees; or (4) fees for products or services voluntarily chosen by the customer. Closing fees and closing costs differ. This offer also does not address any fees you may incur after the closing of the loan, such as late-payment fees, mortgage release fees or other fees associated with the servicing of the loan. This offer does not apply to any traditional fees paid by the seller. This offer is available on applications for certain first mortgages from individuals to Bank of America taken after April 21, 2007, to purchase a 1-4 unit owner-occupied family residence or second home. You must be an existing Bank of America customer. This offer is available only to the real property securing the mortgage. Offer not available through independent mortgage brokers approved to sell Bank of America Mortgage products. Offer is non-transferable and subject to change without notice. Only one application per household. Some restrictions may apply. Credit subject to approval. Normal credit standards apply.

Close-On-Time Service Guarantee

To qualify for the Close-On-Time Service Guarantee, you will need to provide us with all the documentation required by Bank of America in the time frames established by Bank of America. You must lock your rate seven calendar days before the scheduled closing date. There can be no significant changes in your loan after your initial application. Bank of America will not be responsible for delays caused by you or any third parties that you select. Eligible claims are for loans that do not close by your requested closing date or within 25 calendar days from the day of your completed application, including property address if submitting under the BuyerReady® loan option, is submitted. The latter of the two dates will be used to determine the eligibility of the claim. You will need to call 800.497.0072 within 30 calendar days of closing on your loan to submit a claim under this guarantee. The equivalent of your first month's mortgage payment is principal and interest only. Any escrows such as taxes and insurance are not included. Other restrictions may apply. This offer can be withdrawn for new applications at any time. Your mortgage application must be accepted by your Bank of America loan officer while this offer is in effect.

Best Value Guarantee

In order to qualify for the Best Value Guarantee, you must receive full credit approval for the first lien purchase money mortgage with Bank of America. To redeem the $250, you must close your purchase mortgage with another lender, then call 800.870.3206 where you will be prompted to complete a brief survey. You'll be required to fax a copy of your HUD-1 settlement statement from your closing. Your loan with the other lender must be secured by the same property as the property you identified in your Bank of America application. You must close on your purchase loan within 60 calendar days after Bank of America sent you notice of the approval of your Bank of America mortgage. You will receive your $250 check via U.S. mail within 30 calendar days of our receipt of your HUD statement. We may report to the IRS the value of any premium, and any applicable taxes are the responsibility of the recipient.

2. Savings calculations based upon 2006 Bankrate Study

3. Assumes 1% origination fee. All fees are not charged by all lenders.

4. Disclosed savings are based on a loan amount of $200,000 with a 30-year fixed term, a 6.856% APR, 0.311 points, 360 monthly payments of $1,297.20, principal and interest only, 120 monthly payments of $130.00 mortgage insurance in years 1-10 and $33.33 mortgage insurance payments until LTV drops below 78% at 30% coverage, and a 95% LTV (rate as of 4/13/2007). Your benefits may differ depending upon loan amount and term and selections under the No Fee Mortgage PLUS program.

5. HUD Numbers and titles are listed as used by Bank of America. Number may vary by lender. Fees paid by Bank of America are outlined by title description and not title number.

Important note about this calculator:
Savings calculations based upon 2006 Bankrate Study. Assumes 1% origination fee. All fees are not charged by all lenders.

Bank of America, N.A. Member FDIC. Equal Housing Lender © 2007 Bank of America Corporation.  All rights reserved.

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[TJR]

You are right. This offer is a scam.

[PT from Prime Time Money]

Hey Eric. I just got my check after jumping through all the hoops. I managed to have enough energy to post about it on my blog Prime Time Money: http://ptmoney.blogspot.com/2007/12/how-to-get-250-from-bank-of-americas.html

Thanks,

PT

[PardonMyFrench]

nicely done PT and I'm glad you persevered.

Eric

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To qualify for the Close-On-Time Service Guarantee, you will need to provide us with all the documentation required by Bank of America in the time frames established by Bank of America. You must lock your rate seven calendar days before the scheduled closing date. There can be no significant changes in your loan after your initial application. Bank of America will not be responsible for delays caused by you or any third parties that you select. Eligible claims are for loans that do not close by your requested closing date or within 25 calendar days from the day of your completed application, including property address if submitting under the BuyerReady® loan option, is submitted. The latter of the two dates will be used to determine the eligibility of the claim. You will need to call 800.497.0072 within 30 calendar days of closing on your loan to submit a claim under this guarantee. The equivalent of your first month's mortgage payment is principal and interest only. Any escrows such as taxes and insurance are not included. Other restrictions may apply. This offer can be withdrawn for new applications at any time. Your mortgage application must be accepted by your Bank of America loan officer while this offer is in effect.

[Banks]

Unfortunately it is legal to say you have the "best deal" on something, even though it is a very vague description. When it comes to mortgage loan financing, get the APR of the loan, and compare that to the APR of other banks. That is a time-tested way of determining who has the "best deal".

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This advertisement should also come with a disclaimer about how eager they will be to modify "the best deal" in the event you lose your job in this economic downturn.

[Mortgage Loan Modification]

Any lender can charge no fees on a loan. All they have to do is increase the rate charged on the loan - the lender will make their money that way instead.

[Credit Unions]

Don't forget to check with your local credit union to see if they have competitive rates - they usually can provide good deals for their members on loans.

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