Bank Of America Forgives Some Bank Loans
In what has to be a move to help them stave off some state attorneys general, as well as boost up some good publicity for a change, Bank of America is forgiving around $3 billion in debt owed them via bad home loans and people who are going through foreclosures. The amount comes to 30% of total mortgage balances owed them.
The reason this is such a big deal is twofold. One, B of A risked a major lawsuit based on high risk loans that came from Countrywide Financial Corporation, which was bought by B of A in 2008. Though those types of loans came before their ownership, they were on the hook of having to go to court to fight this one, which would have been very expensive and cost them in publicity. Two, it gives a lot of people relief in a lot of states, because it virtually wipes the slate clean for people who are in really dire straits because of the loans, and gives them another opportunity to try to get loan modifications to help them with their payments.
There are a couple of caveats, though. Homeowners have to have missed at least two months of mortgage payments. Also, they have to owe at least 20% more than their home is currently worth. I’ll admit that I’m not quite sure how that second one works, unless they’re talking about a scenario where you purchased your home for $100,000, but with interest you owe $270,000, and after two years you still owe $225,000 on the home, or something like that. If that’s the case, it won’t help homeowners who have owned their homes for a long time and are now in trouble.
Still, it’s a nice step forward, so at least for a few days I won’t be beating up on B of A.