BofA chief: Credit-worthy customers default

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BofA chief: Credit-worthy customers defaultPacific Business News (Honolulu)

Bank of America chief executive Ken Lewis told editors of the Wall Street Journal that he's worried about borrowers with strong credit scores not making loan payments if the housing crisis worsens.

Such concerns by the head of California's largest bank could trigger a tightening of credit availability beyond the subprime customer base.

"There's been a change in social attitudes toward default," Lewis told the Wall Street Journal. "We're seeing people who are current on their credit cards but are defaulting on their mortgages. I'm astonished that people would walk away from their homes."

Apparently even borrowers with strong credit scores are finding it easier to walk away from their mortgages, especially if they put little or no money down on houses and condos purchased for investment purposes.

Lewis' remarks are all the more striking because Bank of America (NYSE: BAC) exited the subprime lending business in 2001 after deciding the risks of participating in this segment of the market weren't attractive. Not to mention the public relations black eye the bank risked by offering credit to subprime customers.

Shortly after the bank exited the subprime business, then-CEO Hugh McColl said in speech to journalists in Atlanta, "I wish I had never heard of subprime."

Sacramento Business Journal

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