Bank of America Corp. is rolling out a new-mortgage product that would allow borrowers to make down payments of as little as 3 percent, in a move that would represent an end run around a government agency that punished the bank for making errors on similar loans, the Wall Street Journal reported today. The new mortgage program, which the Charlotte, N.C.-based lender plans to unveil on Monday, will let borrowers avoid private mortgage insurance, a product to protect mortgage lenders and investors that is usually required for low-down-payment loans. That could make the new loans cheaper than those offered through the Federal Housing Administration, the government agency that has won big settlements from banks in recent years for what the lenders describe as minor errors. The FHA doesn’t make loans but insures lenders against default on mortgages that can have down payments of as little as 3.5 percent and a credit score of as low as 580, on a scale of 300 to 850. When lenders make the loan, they have to certify that everything in a loan file is accurate. Bank of America’s new mortgage cuts the FHA out of the process. Instead, the new loans are backed in a partnership with mortgage-finance giant Freddie Mac and the Self-Help Ventures Fund, a Durham, N.C.-based nonprofit. Bank of America agreed to pay $800 million to settle claims of making errors on FHA-backed loans in 2014.
