Thursday, March 25, 2010
Bailing Out Main Street. What's Up With B of A?
Bank of America is introducing a program to offer homeowners who owe significantly more than their homes are worth the opportunity to have their loan balances reduced. The program, which starts in May, would potentially help about 45,000 homeowners nationwide. In launching the effort, Bank of America is jumping into the debate about how to address millions of homeowners whose mortgages exceed the value of their homes and who have complicated government efforts to reduce foreclosures. The B of A plan is limited in scope. Borrowers must have missed at least two mortgage payments and be significantly underwater to qualify, owing 20 to 30 percent more than their homes are worth. It is also limited to borrowers with certain types of risky loans, including subprime mortgages or other loans with a two-year adjustable rate.
Bank of America expects to forgive about $3 billion in principal on loans as part of the program. The effort expands a settlement agreement that the bank made in 2008 with several states to modify thousands of mortgages. So what happens now? Homeowners who up till now has managed to make all their payments in time, learn that they don't qualify precisely BECAUSE they made all their payments on time. Wonder how long will that $3B goal will last...