BofA Gives Details on Loan Modification Program

Nice to see that the Feds aren’t the only ones bailing people out. Tonight I see a release from BofA wherein it essentially bails itself out itself via a $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 over-priced houses, but as long as mortgage holders are okay with that, then it’s a step.

Originally published at Infectious Greed on Oct 6, 2008 and reproduced here with the author’s permission.