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On Bank Of America's "Novel" Principal Reduction Program
Just because it worked so well the first time around... We can't wait for the totally unexpected mortgage reduction program announced by Bank of America... in 2012.
Bank of America Announces Nationwide Homeownership Retention Program for Countrywide Customers
Nearly 400,000 Countrywide Borrowers Could Benefit After Program Launches December 1
CALABASAS, Calif., Oct. 6 /PRNewswire/ -- Bank of America today announced the creation of a proactive home retention program that will systematically modify troubled mortgages with up to $8.4 billion in interest rate and principal reductions for nearly 400,000 Countrywide Financial Corporation customers nationwide.
The program was developed together with state Attorneys General and is designed to achieve affordable and sustainable mortgage payments for borrowers who financed their homes with subprime loans or pay option adjustable rate mortgages serviced by Countrywide and originated prior to December 31, 2007. Bank of America acquired Countrywide July 1, 2008.
"We are confident that together with the Attorneys General we have developed a comprehensive program that provides more solutions than ever before to assist troubled borrowers and put them back on the path to sustained home ownership," said Barbara Desoer, president, Bank of America Mortgage, Home Equity and Insurance Services. "Since acquiring Countrywide in July, we have committed significant resources and developed innovative programs to help as many Countrywide customers as possible stay in their homes."
Countrywide mortgage servicing personnel will be equipped to serve eligible borrowers with new program elements by December 1, 2008 and will then begin proactive outreach to eligible customers. Foreclosure sales will not be initiated or advanced for borrowers likely to qualify until Countrywide has made an affirmative decision on the borrower's eligibility.
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.
Punchline: date of press release - October 6, 2008
h/t Clark
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How long can BA beat a dead horse?
The saddle on that dead horse makes it look faster.
hey there's more than one way to skin a cat. (whoop, there it is.)
I think the first program helped like 5 people...who subsequently walked away.
Note the numbers - first program, 400,000, this program, 45,000, next program...
the punchline was great!
I watched mainstream tv news today, ABC with Diane Sawyer at 6:30 p.m.
They had a BAC stiff on who said that BAC had a goal to now help 45,000 with mortgages underwater: the reporter answered with a "that's only 4%"...the stiff says "um,yeah, it is 4%).
as zh'ers well know, we got a big obese elephant in the room. Banks have such capital problems that many are near insolvent and only propped due to FASB 157. We have 25% of the mortgages in the usa underwater and 1 in 6 mortgagors are late or in some stage of foreclosure. this is rock meet hard place and the thing that kills me is that NOBODY will say out loud that this is where the problem lies! of course, nobody will, hence, we will have a bank zombie scenario for years and housing will continue to slide.
on that note, for the life of me, i don't know why anybody in their right mind would buy a bank stock right now. hell, they are almost as overvalued as some of the dot bust companies were.
Sorry, FAZ and SKF burnt me hard cause I was an idiot for being too logical.
7.5m delinquent, 11m underwater, and there is not an exact overlap. So if these sorts of programs get a lot of press, I can easily see another 2m mortgages going delinquent intentionally.
This is going to get real ugly.
It seems to me that the only reason BAC has any program at all to "help" delinquent homeowners is to act as a cover for delaying foreclosure and having to acknowledge the loss on their books. It's like, "oh well, we're still negotiating with the mortgage holders on those 1,000,000 delinquencies..."
Meanwhile, they get huge xmas bonuses.
Hey DH (how are you doing)??? / This BAC announcement has little real effect (either for consumers or the bank) and is totally a PR play getting ahead of the "upcoming pressure" about to come down from government. BAC's management team has had this sitting, waiting, on a shelf for months. It's smoke-n-mirrors. The consumer/homeowner is broke, as are the banks.
One of the most important commodities on earth -- is TIME. With enough time, one generally can work themselves out of a bad position. The banks, government, this entire economy is doing nothing more than trying to buy TIME. The problem is, the entire system is now inherently bankrupt, there is no real money, and everyone's Ponzie Scheme of wealth by issuing debt has been exposed and nullified.
Return of principal is now paramount (keeping and maintaining wealth). And in a Ponzie economy, very few truly understand this today. Good luck our friend and keep your head up.
Dunno about financing but I know this. I do pictures and measurements for insurance underwriters. Companies are looking hard for any reason to dump policies. They will dump even if the homeowner can mitigate the problem. Then what? The loan gets called for no insurance? Creeps, all of em.
Expect the GSE to implement a similar program for deep underwater borrowers. The strategic default risk is a real danger and this is a way to address it (as much as I detest it). At least this program actually will reward good behaviour by only eliminating the principal if payments remain current - although it should be more back loaded and only available for purchase loans - no cash out borrowers need apply.
Many deep underwater borrowers have mortgage insurance. Do you think the GSEs are going to let the MIs off the hook for their losses? The market sure thought so today. Me, I am not convinced.
I do not think they will let the MI's off the hook and I also think they are intending to put back or get compensation on any loan that goes bad that has any rep and warrantee issues.
BaC, and other major US banks, shares may quadruple by 2012 says Dick Bove.
http://www.bloomberg.com/apps/news?pid=20601109&sid=ayRy5Vg0RLGM&pos=13
Yeah, I saw this earlier when a friend emailed me the article about the new program..subject of course was "LOL" and text was just the link to the article. Nothing more had to be said and no response was neccesary.
Why not open the special deals that Sen. Dodd and Conrad got from Mozzarella, to those poor deliquents?
He Shortbus Billy, you have as your Avatar Bubbles from Trailer Park Boys. That is one funny series. Also I remember when they where talking about this back in October of 08 but it didn't go anywhere because of the usual. And that is who's going to make up for the loss in principal that would be required for the payments to the bond holders of the mortgage instruments/bonds. If they don't get their payments or the payments on the schedual that was contractually agreed upon, the issuer is in default of the bond. Which makes all their bonds they issued essentially questioned and downgraded which starts a very fast chain reaction of people wanting their money back.
Fucking classic. I stopped lauging just long enough to comment before I start crying.
NO program can help unless it takes a significant hit to the bank?
Now tell me will any bank do it?
Whatever BAC is offering in these fixes, you can be damn sure they'll recoup it and then some at a later date. A TBTF super-duper fix is in the works and this latest principal reduction program is just PR fluff to buy time. I'd love to see something unexpected hit these bastards and upset their little schemes. Karma, sweet/vicious Karma...
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