Bank of America USDA Rural Home Loan Approvals: Has BofA Quit Funding USDA Loans?

I have been getting calls from local real estate agents and prospective home buyers in Riverside County of California asking me if Bank of America is still approving USDA Rural Development home loans.  For weeks I kept saying yes, I think so…..why wouldn’t they?

Why would Bank of America discontinue offering USDA home loans in California?  Or have they stopped funding them in all 50 states? 

It’s hard to believe Bank of America, the country’s largest mortgage lender, would discontinue approving and funding such a well underwritten loan program designed to help family’s with moderate income, purchase a home with no down payment?  From what I understand, the USDA home loan actually has a lower default rate than an FHA loan where buyers come in with a 3.5% down payment.

So much for the ‘skin in the game’ theory that many people believe is a key requirement needed to reduce foreclosures.  If size of a down payment is such a strong indicator of future default, why would USDA have a lower foreclosure rate than FHA?

OK, this blog post was not written to open that can of worms for discussion…….lets move on and save that discussion for another day.

Back to Bank of America and USDA home loans.  After contacting several real estate agents in the Inland Empire, and speaking to a retail Bank of America Loan Originator, they did confirm that Bank of America is no longer offering the USDA home loan to their customers.  At least in California.

Are there any Bank of America employees out there who can verify or shed some light on this?

My next thought was, is Bank of America’s slogan the ‘Bank of Opportunity’ still an appropriate description?  They just eliminated one of the two remaining 100% financing home purchase loan that will surely have some sort of impact on our housing market.  And with Bank of America laying off 40,000 employees, those people are losing out on some degree of opportunity, right?  Or maybe being let go by Bank of America is a blessing in disguise?  A new or better opportunity?

Then I had another thought.  What will the impact be on the housing and lending markets?  Other mortgage broker and lenders in California will have to pick up the slack and fill a huge role in approving and funding these USDA loans, right?

But even more so, what will Bank of America Loan Originators tell prospective home buyers who want to purchase a home in a USDA eligible county/area?  Will they conveniently not inform or tell them the USDA 100% financing program is an option that gives them the lowest payment?

Everyone knows that even with USDA now charging monthly mortgage insurance, the monthly payment on a USDA loan is still lower than an FHA loan with a 3.5% down payment, right?

Will Bank of America refer buyers out to other lenders when they ask for the USDA loan?  Has anyone ever heard of Bank of America brokering a loan to Wells Fargo or CHASE for the benefit of the client?  Will they STEER them into a loan program that requires a down payment and results in a larger monthly payment?

When was the last time you ever heard of a bank retail mortgage loan officer tell a client they can get a better loan by going elsewhere?  Never.

Knowing Bank of America loan originator’s cannot offer loans like the USDA, HomePath, or VA cash out refinance (and who knows how many other programs they don’t offer), would you as a consumer feel confident they can provide you with the best loan options for your home purchase or refinance?

I am so thankful for being able to work both as a direct lender and have my employer be a licensed mortgage broker in California.  This allows us to offer 95% of the home mortgage and down payment assistance programs available to prospective home buyers and home owners.

I don’t know how Bank of America loan officers can go home each night with a clear conscious when they knowingly steer their clients away from the USDA home mortgage loan (and other loan programs they don’t do) to loan programs that result in higher payments and require larger down payments.