jesus saves; moses invests; b of a forgives

Bank of America is making plans to offer about 200,000 homeowners mortgage reductions averaging $150,000, provided they meet certain criteria. The majority of them will get letters "by the third quarter," which begins in July.

In order to qualify, homeowners have to a) be underwater, with the property worth less than the remainder of the mortgage, b) be 60 or more days behind in payments, and c) the loan has to be owned OR serviced by B of A.

Full story at the New York Times -- an excerpt:

The principal reduction offers from Bank of America Home Loans are the result of a $25 billion settlement agreement earlier this year with 49 state attorneys general as well as federal authorities who had been investigating allegations of abuses over the handling of foreclosures.

“To the extent principal reduction and other modification tools help us turn mortgages headed for possible foreclosure into long-term performing loans, it will be positive for homeowners, mortgage investors and communities,” Ron Sturzenegger, a legacy asset servicing executive, said in the statement.

It goes without saying that this will help homeowners and communities, but Mr. Sturzenegger doesn't clarify why -- or just how much -- it will help the bank. To know that you have to know what kinds of fines were levied against them when they signed that settlement agreement with the states' attorneys-general, and what they have to do to get those fines reduced or forgiven.

For that you need to read David Dayen at Firedoglake, who adds some more pertinent information to the mix:

I'm generally happy to see any principal reduction happening, though of course these are letters and not actual principal reductions. BofA sent out the letters to 200,000 borrowers, and now they can pick and choose on whom to bestow these benefits. And additionally, BofA will build in a three-month trial period where borrowers will have to pay the mortgage at the new rate. This was the trap in HAMP, as borrowers didn’t get an answer on a permanent modification after three months, waited, and were then hit with a denial and a demand for the difference between the trial payments and the original mortgage within days to avoid foreclosure. Looks like BofA may be setting the same trap.