BankAmerica Corp. is seeking to build its portfolio of high-balance, low-risk home loans to relocating corporate executives through a new alliance with Coldwell Banker Relocation Services.
The deal, announced last week, is expected to result in $300 million to $500 million of home loans in the first year, according to Arthur D. Ringwald, executive vice president and head of BankAmerica Mortgage.
Bank of America will serve as the lead lender in a network of local, regional, and national lenders that will provide mortgages to corporate executives making a move. BankAmerica will process all loans, even when it is not providing the mortgage.
Mr. Ringwald said the bank was attracted to the deal for two reasons.
First, it will yield the kind of mortgages that BankAmerica wants.
"If you think about it, with the very high cost associated with relocating employees in today's world, corporations aren't going to be moving around people that they don't think are high achievers or upwardly mobile or solidly employed," Mr. Ringwald said.
"These are the kinds of people (who) don't default," Mr. Ringwald added. "They make their payments on time."
"B of A's focus on high credit quality is one of our strategic imperatives. So this links very nicely with our strategic imperatives," Mr. Ringwald said.
Second, the deal gives Bank of America valuable cross-selling opportunities.
"If someone is relocating to an area of the country where Bank of America has branches from an area where Bank of America doesn't, or where their old bank doesn't have branches in the new market area, they will be looking for a new relationship," Mr. Ringwald said.
He said Bank of America hopes to sell the relocating executives credit cards and home equity lines of credit, among other products.
Because of the high credit quality of such mortgages, Bank of America will use more flexible underwriting standards for these loans than do the secondary market agencies, Mr. Ringwald said.
For example, the bank will allow borrowers to use a larger portion of their income to make monthly mortgage payments.
And even if the spouse of the relocating executive loses his or her job as a result of the move, the bank will count the spouse's previous income in calculating the couple's capacity to repay the loan.
The assumption, Mr. Ringwald said, is that the spouse will be able to get a job in the new location.
The loans will be held either in Bank of America's portfolio or sold to nonagency investors in the secondary market.
Stephen Roney, chief executive of the Coldwell Banker relocation unit, said the company relocates up to 18,000 corporate executives who need mortgages each year.
Among the major corporations that use Coldwell Banker's relocation services are IBM, AT&T, and General Electric, Mr. Roney said.