Bank of America, the country’s largest bank, has faced a flood of borrowers defaulting on loans and lawsuits over some of its foreclosures since it purchased Countrywide Financial Corp. in 2008. Now, reportedly, the bank is in talks with state and federal officials to write down the principal owed on some struggling borrowers’ loans in exchange for a release from the mounting legal disputes against it, according to The Wall Street Journal.
The talks are part of an ongoing settlement between banks and state and federal officials over bad reviews and paperwork processing problems with foreclosures that surfaced last fall. Bank of America reportedly has approached officials in one-on-one talks about the mortgage writedown proposal.
The principal reductions would apply to the bank’s own mortgages as well as those it services from private investors, The Wall Street Journal reports. Borrowers would have to prove financial distress to qualify. The principal amount would also have to be $1 million or less in certain areas.
In return for the writedowns, Bank of America reportedly has told state and federal officials that it wants to be protected from future litigation in regards to its mortgage servicing.
The Wall Street Journal says it’s unknown whether other banks are putting forth similar proposals.
Source: “BofA Proposes Loan-Forgiveness Deal,” The Wall Street Journal (Aug. 2, 2011)
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