BofA in side deal with US govt on mortgage foreclosures

Reuters ^

[sunmars]

Bank of America, one of five banks in $25 billion settlement with the U.S. government over foreclosure practices, has struck a side deal that will allow it to reduce penalties in return for bigger cuts to borrowers' mortgage balances, the Wall Street Journal said.

Bank of America will make deeper and broader cuts than other banks, which will allow it to avoid as much as $850 million in penalties and give more than 200,000 financially strapped households the opportunity to sharply reduce their mortgage balances, the paper said.

The side deal is unique to Bank of America, the Journal said, citing a senior administration official. It added that many of the write-downs will be made on loans originated by Countrywide Financial Corp, which Bank of America bought in 2008, and then packaged into securities.

Investors in those securities could then be affected by the side deal.

Bank of America said on Feb. 9 that under the government settlement, write-downs will be made on loans originated by Countrywide Financial Corp prior to and for a period following the bank's acquisition of that lender.

Borrowers who qualify are expected to receive principal reductions averaging more than $100,000, Bank of America spokesman Dan Frahm told Reuters.

The side deal offers qualifying borrowers a chance to cut their mortgage balances to their home's current market value. Whereas other banks are required under the national settlement to cut principal to no more than 120 percent of the home's value, the Journal said.

Bank of America, the bank with the most liability from the fallout of the housing crash, is set to pay the lion's share of the government's settlement, around $11 billion of it.

[sunmars]

Here we go again...ridiculous.

[Theoria]

A ‘free-market’ would have put BoA out of their misery long ago.

[Revel]

The big bankers are in Rico with the US government. One big criminal enterprise.

[gunsequalfreedom]

BofA officials should have gone to Jail along with the other bankers that brought this economic mess down on the world. Sentences of 15 years to life are what the government should have handed out to this scum

[LomanBill]

       

"We didn't truly know the dangers of the market, because it was a dark market," says Brooksley Born, the head of an obscure federal regulatory agency -- the Commodity Futures Trading Commission [CFTC] -- who not only warned of the potential for economic meltdown in the late 1990s, but also tried to convince the country's key economic powerbrokers to take actions that could have helped avert the crisis. "They were totally opposed to it," Born says. "That puzzled me. What was it that was in this market that had to be hidden?"

http://www.pbs.org/wgbh/pages/frontline/warning/view/

[Jack Hammer]

Sorry, B of A, congress dictated your mortgage loan practices, and then, when you lost millions following them, sneered at you.

But, hey, at least our Fearless Leaders stuck the American taxpayer with the bill for all those defaults.

[jimnm]

I wonder if the feds will do racial impact studies and subsequent lawsuits like they do for other banks and mortgage lender.

Nope, since the writedowns will disproportionately go to Obama voters.

[raybbr]

Anyone know if the reduction in principal will be taxed as income?

[EVO X]

Not if it is a principle residence and is the reduction is completed by the end of the year.

IRS Link

[JTHomes]

However, the debts are bad debts, they either need to be written down, defaulted on, or paid down (unlikely and will take 10-20 more years). I don’t like the back room deals that led to this that we won’t know anything about who got paid off and how at tax payer expense. There isn’t any easy way out of the mess that the government, banks and mortgage markets have left us with.

[longtermmemmory]

talk about bad faith negotiating.

this should void the entire original deal.

[longtermmemmory]

The Obama administration just made every attorney general look like a boob.

seems as those attorneys general are looking really stupid for taking all those election promises.