Aid for sub-prime crisis
Bank of America is looking to reduce the mortgage interest payments of nearly 400,000 sub-prime borrowers in the US by up to £4 billion...
All of the borrowers are from Countrywide Financial which BoA bought on July 1st.
It has created what it has dubbed a 'proactive home retention program' that will systematically modify troubled mortgages with interest rate and principal reductions.
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 sub-prime loans or pay option adjustable rate mortgages serviced by Countrywide and originated prior to December 31st, 2007.
Barbara Desoer, President of BoA's mortgage, home equity and insurance services division, says, "We are confident that together with state 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.
"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 made aware of revised program elements by December 1st of this year and will then begin proactive outreach to eligible customers.
Repossession sales will not be initiated or advanced for borrowers likely to qualify until Countrywide has made an affirmative decision on the borrower's eligibility.
First-year payments will be targeted to equate to 34 per cent of the borrower's income and will 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.
Other options include refinancing under the Federal Housing Administration and principal reductions on adjustable rate mortgages that restore lost equity.
Under the national program, Countrywide will not charge eligible borrowers loan modification fees and will waive prepayment penalties for subprime and pay option adjustable rate mortgage loans that it or its affiliates own.
Source: www.mortgagestrategy.co.uk