The New York Times is reporting that Bank of America has a new loan modification program in the works. This invite-only program would mostly benefit borrowers who are underwater on their mortgages. As the NYT writes:
Bank of America officials said the maximum reduction would be 30 percent of the value of the loan. They said the program would work this way: A borrower might owe, say, $250,000 on a house whose value has fallen to $200,000. Fifty thousand dollars of that balance would be moved into a special interest-free account.As long as the owner continued to make payments on the $200,000, $10,000 in the special account would be forgiven each year until either the balance was zero or the housing market had recovered and the borrower once again had positive equity.
This could be a very positive program for many borrowers. It also may indicate that the banks are finally realizing that paying homeowners are better than umpteen empty REOs when it comes to the bottom line. The article also notes that Bank of America is facing significant external pressure in the form of lawsuits and investor rumblings. While this pressure may have also spurred along the development of this new program, the bottom line is that this may be a good thing for distressed home owners. Only time will tell.
