"Mortgage Professor" grades BofA's no fee loan

In a column published this week on the Inman News site, "The Mortgage Professor" Jack Guttentag scrutinizes Bank of America's No Fee Mortgage Plus loan. The column has a prominent place on Yahoo! Finance's Real Estate page today -- and rightly so, since this loan has generated a lot of interest.

BofA's No Fee loan not only promises to eliminate junk fees, but incorporates third-party charges like title insurance, mortgage insurance, appraisal costs, and a credit report in its rate and points. Guttentag says there's only one other lender doing all that -- ABN AMRO -- and that BofA is unique in taking care of mortgage insurance on loans where the borrower puts less than 20 percent down.

The big question about the loan has been whether BofA is simply recouping all those costs -- and maybe more -- by charging higher points and interest rates. Guttentag says BofA's Web site doesn't make comparisons to other loans easy. There's a limited ability to test out different combinations of points and fees, and forget about shopping ARMs because you're not given index, margin, rate caps or maximum rate, he says. Working under those and other limitations, Guttentag ran 11 comparisons with a lender that meets his "Upfront Mortgage Lenders" certification requirements. BofA's loan was the better deal five times, but more costly six times.

The bottom line is that it depends on the borrower's circumstances whether this loan is a good deal or not, Guttentag says, and some borrowers won't be able to comparison shop online.

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