Industry NewsMortgage

BofA to kill Countrywide’s subprime, option ARM programs

Regulators hold hearings on planned merger

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Bank of America officials told regulators today they plan to discontinue Countrywide Financial Corp.'s option ARM loan program and "significantly curtail" other nontraditional mortgages such as low-documentation loans "as soon is as practical" after closing a deal to acquire the company later this year. At a hearing in Chicago today, Bank of America officials said that after the merger -- scheduled to close in the third quarter -- the combined company will no longer make subprime loans, in accordance with Bank of America's existing policies. Countrywide curtailed almost all subprime lending last year, after the credit crunch forced it to focus on originating loans eligible for purchase or guarantee by government-sponsored entities Fannie Mae and Freddie Mac.Bank of America's new lending guidelines for the combined company also include limits on prepayment penalties, and protections on interest-only and hybrid adjustable-rate mortgages (ARMs) designed to li...