Bank of America Foreclosure Relief

Bank of America has announced the steps it will take to reduce both the number and effects of foreclosures with its acquisition of Countrywide Financial Corp., formerly one of the nation’s largest mortgage servicers.

Under the new mortgage lending guidelines from the combined company, more than $40 billion in troubled loans would be modified or worked out, and some 250,000 homeowners could be prevented from losing their homes.

In keeping with BofA’s previous policy, tenants living in foreclosed properties will be able to remain on the premises for 60 days after the completion of foreclosure proceedings. A tenant who willingly leaves the property within 30 days of the completion of proceedings will receive a “cash-for-keys” payment of $2,000 to help with relocation expenses.

The new combined business will offer customers first lien mortgages in the following categories:

• Conforming loans underwritten according to standard government guidelines, such as Expanded Approval and FHA/VA guidelines established for low-to-moderate income borrowers.
• Non-conforming loans whose terms will produce  no greater risk of default than would conforming loans.

• Adjustable-rate, fixed-rate and interest-only mortgage products subject to an interest-only period of at least ten years, to prevent any payment troubles in the short run.
• Fixed-period adjustable rate mortgages (ARMs) with low initial rates and fixed payments for borrowers, and subject to protections against dramatic increases in payment amounts.

BofA also expects to maintain its longstanding policy against originating subprime mortgages.

The new combined mortgage business also announced several changes to home loan products:

• They will discontinue nontraditional mortgages for which payments do not cover the interest accrued, leading to negative amortization. The so-called “option-ARM loans” are one example.
• To a great extent, they will cut back on other nontraditional mortgages such as “low documentation” loans.
• They will put greater protective measures into place to the benefit of borrowers, such as limits on prepayment penalties and protections on nontraditional loans that will ensure that long-term payments stay affordable.

Liam McGee, Global Consumer and Small Business Banking President at Bank of America:
“We believe the financial strength, security and stability of the combined company will allow us to enable people to buy homes and stay in homes, and to assist many of those affected by the current mortgage troubles…We will continue to work with distressed borrowers to match the customer’s repayment ability with the appropriate loss mitigation option, including loan modifications, forbearances, repayment plans, lower rates and principal reductions.”