Last night Bank of America announced that it was suspending the origination of its fixed-rate product in Illinois. This occurred because of the Illinois High Risk Home Loan Act (HRHLA), which only applies in the state of Illinois. The act is designed to protect borrowers against high-cost loans, and applies to all kinds of loans and mortgages. Under the threshold set by HRHLA, Bank of America’s fixed-rate product is high cost, since the total closing costs often exceed 5% of the principal limit.
As a result, Bank of America has suspended all fixed-rate reverse mortgage loans in Illinois effective immediately. They are not allowing wholesale partners to purchase any more Illinois high cost loans. Bank of America will work with all business partners regarding Illinois loans with a closing costs:principal limit ratio greater than 5%. If new fixed-rate loan applications are received by Bank of America, Bank of America will work with the business partner to determine if the transaction should be re-disclosed as an adjustable-rate. Otherwise, the loan will be denied.
Although Bank of America has only been issuing its fixed-rate product for the last month or so, this change is still likely to reverberate throughout Illinois.