Bank of America Plans to Reduce Mortgage Principal for Some Customers
The New York Timesreports that Bank of America plans to forgive some borrower's mortage debt. Some homeowners now have mortgages that are larger than the value of their homes because of the housing bubble bursting. Bank of America is hoping that by reducing the loans they will have less foreclosures in the future.
Bank of America’s program may increase the pressure on other big banks to offer more help for delinquent borrowers, while potentially angering homeowners who have kept up their payments and are not getting such aid.
As the housing market shows signs of possibly entering another downturn, worries about foreclosure are growing. With the volume of sales falling, prices are sliding again. When the gap increases between the size of a mortgage and the value that the home could fetch in a sale, owners tend to give up.
The Times says Bank of America's new program will start with about 45,000 Countrywide borrowers. The bank plans to "reach out to delinquent borrowers whose mortgage balance was at least 20 percent greater than the value of the house." The Times says there are 1.2 million Bank of America homeowners who are in default.
The New York Times 
