Bank of America Corp.'s credit standards for jumbo mortgages may have slipped as a result of the merger between the old BankAmerica and NationsBank Corp., according to Moody's Investors Service. Moody's is insisting on more credit enhancement before it will award an AAA rating to Bank of America jumbo mortgage pools and said in a recent report that in the near term "uncertainty will be the watchword'' concerning the pools' credit quality.

Bank of America's credit enhancement level was hiked to 4.5% to 5%, from the 4% level it had before the merger, Moody's said. The credit enhancement percentages reflect the amount of subordinate classes of bonds. These lower-rated bonds are designed to protect the AAA-rated securities. Most originators of jumbo loans have credit enhancements of 4% to 5.5%, the ratings agency said.

The former BankAmerica and NationsBank completed their merger in September 1998. Their mortgage units have been operating as Bank of America Mortgage since April. The combined mortgage unit has a 15% market share and is the top-ranked loan servicer and No. 2 retail loan originator.

A Moody's report by Jeffrey L. Wolf, a vice president and senior analyst, says that questions about which institution's credit culture would dominate have yet to be resolved. Until this is "clarified" the credit enhancement level for Bank of America's 30-year, fixed-rate jumbo product "will remain higher than that of the premerger company," he said. Bank of America did not return a call seeking comment.

Bank of America's retail channel accounts for about 45% of its business. The company has reduced its reliance on brokers and built its correspondent loan channel. Mr. Wolf said growth in the correspondent channel could translate into a "net negative." BankAmerica's "airtight origination strategy had long been an essential aspect of its superior loan quality," he said.

Bank of America is using underwriting guidelines that reflect a "softening of that stringency" from the old BankAmerica, the report said. For loan applicants without an established credit history, the guidelines allow approving loans on the basis of such forms of credit as payment history for cable television, telephone service, and electricity.

Moody's acknowledged that the merger enhanced geographic diversity in the mortgage unit's loan pools. BankAmerica typically had a large concentration of California loans that "consistently marked (and marred)" its pools, the report said.

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