BofA offers help to struggling homeowners to avoid millions in penalties
Charlotte-based Bank of America will provide mortgage relief to some 200,000 homeowners, according to the Wall Street Journal. Qualified borrowers who are “underwater” on their mortgages would have a chance to cut their balances to the home’s current market value.
Well this side deal is part of the $25 billion settlement announced in February designed to resolve federal and state investigations into widespread mortgage fraud, including fraudulent foreclosure practices.
Here’s more from the WSJ:
“The expanded program could allow Bank of America to avoid paying $350 million in penalties tied to the foreclosure settlement and half of a separate $1 billion penalty related to a settlement of false claims filed on loans backed by the Federal Housing Administration, if the bank meets certain targets. Many of the write-downs will be made on loans originated by Countrywide Financial Corp., which Bank of America acquired in 2008, and then packaged into securities. BofA will also reduce balances on loans it owns.”
That last sentence is important – the deal applies to those loans owned by Bank of America. Fannie Mae, Freddie Mac, FHA or VA-backed loans are not eligible for the principal reductions.
It’s estimated that in North Carolina more than 171,000 households are underwater, owing thousands of dollars more on their mortgage than their home is worth.