Bank of America: Bailing Itself Out?

Nice to see that the Feds aren't the only ones bailing people out.  I see a release from BofA wherein it essentially bails itself out itself via an $8.4-billion mortgage modification program for people with home mortgages obtained through its Countrywide subprime subsidiary. Granted, it did this at the urging of various state Attorneys General, but still.

The centerpiece of the program is a proactive loan modification process to provide relief to eligible borrowers who are seriously delinquent or are likely to become seriously delinquent as a result of loan features, such as rate resets or payment recasts.

Various options will be considered for eligible customers to ensure modifications are affordable and sustainable. First-year payments of principal, interest, taxes and insurance will be targeted to equate to 34 percent of the borrower's income. Modified loans feature limited step-rate interest rate adjustments to ensure annual principal and interest payments increase at levels with minimal risk of payment shock and redefault.

Modification options include, among others:

• FHA refinancing under the HOPE for Homeowners Program;
• Interest rate reductions, which may be granted automatically through streamlined processing; and
• Principal reductions on Pay Option adjustable rate mortgages that restore lost equity for certain borrowers.

Of course, it still keeps people in overpriced houses, but as long as mortgage holders are okay with that, then it's a step.

Comments

[AlexS:]

The private sector will bail out the borderline cases. The public sector (i.e. the politicians) will attempt to bail out the hopeless cases and will, of course, fail.

2008 Oct 06 10:59 AM

[atavist.avatar:]

How can one comment on trivia.

2008 Oct 06 11:11 AM

[Urbane Gori...:]

Well.... BofA just pre-announced... CNBC was pretty excited, so I may have heard it wrong, but they were supposed to hit 60 cents a share and are reporting 15 cents. They're going to cut the dividend by 1/2 and raise capital..

jegan ;-)

2008 Oct 06 04:19 PM

[Bru:]

Let me get this right. BofA pays more than it has to for Merrill. Dilutes their shares. Cuts it dividend. It sure sucks being a shareholder of Bof A.

Bru

2008 Oct 06 06:08 PM

[User 275334:]

CEO Lewis has to be FIRED NOW!! Why? Because he lied when he told Whitney that we wouldnt cut the dividend!! Because he went on a EGO buying spree! and the stock is tanking!! FIRED THIS LIER!! NOW!!!

2008 Oct 07 12:47 AM

[nyka:]

User 27..LIER? What's that????

2008 Oct 07 11:57 AM

[somerville:]

It sounds like the CEO is heading in the right direction. We need to look at these loan modifications quickly. There is a much bigger picture out there than the dividends being cut in half. If they (all major banks) don't start looking at how to help the consumers stay in their home, people everywhere will be looking at forclosures in their OWN neighborhoods. Want to watch the value of your home be cut in half in the near future. ? Get with the program! Don't freak out about your dividend program when there are much bigger problems out there right now.

2008 Oct 07 12:20 PM

[lasvegasrea...:]

So -- are they going to be more receptive for homeowners with a hardship who need to do a short sale and get out of the homes they are in -- before they go to foreclosure?

Loan modifications really don't help out homeowners who have lost their jobs, divorced, or have been hit with unexpected bills -- all of which seem to be on the rise. We have over 6,000 short sales available for sale on our MLS, another 2,000+ in escrow, yet only 273 homes classified as a short sale closed escrow last month.

Banks could be doing a better job of bailing themselves out by releasing the bad loans (before going to foreclosure in the first place) and doing some good loans on real estate that has had a significant reduction in prices.

Just my thoughts as we deal with all of the short sales we currently have for sale --- who all tried working something out with their respective lenders in the first place.

2008 Oct 07 01:25 PM