24 Mar Bank of America’s Mortgage Writedown: Too Little, Too Late, and Too Confusing
Three years into the mortgage foreclosure crisis, a major lender has finally announced that it will reduce principal on “underwater” mortgages. Sort of.
According to The New York Times, BoA won’t actually write down loans to the value of the property (which is more than it would get in a foreclosure). Rather (and here’s where it gets confusing):
Bank of America executives said the program would work this way: A borrower owes $250,000 on a house now worth $200,000. Fifty thousand dollars of that balance would be moved into a special interest-free account.
As long as the owner continued to make payments on the $200,000, every year $10,000 in the special account would be forgiven until either the balance was zero or the housing market recovered and the borrower once again had positive equity.
The program would be available only to former Countrywide customers (Countrywide was acquired by BoA in 2008) and is by “invitation only.” It is unclear what the application process is or when this program will go into effect.
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