Bank of America, one of the five banks in the $25 billion settlement with the government over foreclosure practices, has struck a side deal. It will allow it to reduce penalties in return for bigger cuts to borrowers’ mortgage balances. Bank of America will make deeper and broader cuts than other banks; it will allow it to avoid as much as $850 million in penalties. And, it will give more than 200,000 financially strapped households the opportunity to sharply reduce their mortgage balances.
This deal is unique to Bank of America and many of the write-downs will be made on loans originated by Countrywide Financial Corp. Borrowers who qualify will receive principal reductions averaging more than $100,000. The side deal offers qualifying borrowers a chance to cut their mortgage balances to their home’s current market value. Whereas other banks must under the national settlement cut principal to no more than 120 percent of the home’s value.
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