• by Judy Warner , January 10, 2007

First came free equity trades. Now it's reduced-fee mortgages. Bank of America has begun testing a reduced-fee mortgage in the state of Washington to determine whether it will attract more customers.

BofA is running a limited print and radio campaign and has in-branch point-of-sale materials heralding its offer to "Save up to $2,000 at closing."

"We're learning from the test and evaluating the results," said BofA spokesperson Terry Francisco.

Available only to existing BofA customers, the savings include waivers on application, origination, appraisal, credit report and flood determination fees--plus a $200 credit toward closing costs. In addition, the offer provides applicants $250 if they're approved for a mortgage but opt to take out a loan from a competitor.

Another feature allows mortgage holders to switch to a lower rate once a year without paying a fee.

BofA said its reduced-fee mortgage, available only to existing bank customers, isn't like the industry's traditional offerings that bump up the interest rate to offset the fee waiver.

The Washington state pilot program is scheduled to run through June 30. If it's successful in wooing more mortgage customers, it's likely the banking giant would roll it out in all 30 states where it currently does business.

According to figures compiled by MortgageDaily.com for the third quarter of 2006, Bank of America ranked sixth in residential mortgage production. Its two main competitors in the mortgage marketplace--Countrywide Financial and Wells Fargo--are both headquartered in California.