B of A chief comments on subprime mortgages
Bank of America Corp.'s chief executive officer said today that much of the turmoil in the residential housing market was the result of “very bad lending practices” by some companies that specialized in so-called subprime mortgages.
The remarks came in an open session between the executive, Kenneth Lewis and reporters after Lewis gave a speech to the International Swaps and Derivatives Association, which is meeting at the World Trade Center in South Boston.
Bank of America exited the subprime mortgage business in 2001, just as the housing market in Boston and elsewhere started a five-year boom of record sales and price increases. But a recent slump in the market has been marked by flat prices, record foreclosure filings and houses that languish on the market for months without offers, and subprime loans have been blamed for some of the troubles.
Subprime mortgages are loans given to people with less-than-stellar credit that typically carry higher interest rates than traditional loans. Recent studies have revealed that some people who bought during the housing boom and have been foreclosed on used such loans, and that African-Americans were far more likely than Hispanics or whites to have bought their homes with subprime loans, even in cases where they would have qualified for cheaper mortgages.
“We have no interest in getting back into the subprime market and I’m glad we got out in 2001,” Lewis said when asked if Bank of America would consider such a move. He pointed to higher gas prices as a factor in rising delinquencies among mortgage holders, and said that “was exacerbated by some very bad lending practices that were unique to some of the companies in that [subprime] business.”
Traditional banks, he said, won’t likely have the same problems in their mortgage business unless other problems present themselves in the economy, such as a widespread loss of jobs.
(By Keith Reed, Globe staff)
