Bank of America to Tighten Mortgage Standards

Bank of America (NYSE:BAC) on Tuesday outlined proposed plans to implement new lending guidelines for its consumer mortgage business ' as soon as is practical' following the completion of its proposed acquisition of Countrywide Financial Corp (NYSE: CFC).

The new changes include ending the origination of subprime mortgages, greatly reducing the number of no- or low- documentation loans issuing adjustable rate mortgages that have a much longer interest-only payment period in order to reduce huge resetting payments.

Speaking at a public hearing at the Chicago Federal Reserve, Bank of America Global Consumer Credit Executive Bruce Hammonds, said, "We recognize this tightening, by definition, restricts the availability of credit to some borrowers. However this will help ensure that those who get loans can afford to repay them."

Other loans, such as those conforming to government-sponsored entities Fannie Mae and Freddie Mac and fixed-period ARMs that provide low initial rates, but fixed payments and protections against steep payment increases will continue to be offered.