B of A is Doing What??

B OF A -

BofA Proposes Loan-Forgiveness DealPosted by GLOZAL on August 3, 2011 at 8:00am


.Bank of America Corp. is having preliminary conversations about a home-foreclosure settlement that would reduce the amounts owed by some of its troubled borrowers in exchange for a broad release from legal claims against the lender, said people familiar with the talks.

The largest U.S. bank by assets is discussing the proposal with state and federal officials who are prodding the country's biggest banks toward a multibillion-dollar deal to atone for foreclosure errors. It isn't clear if the talks will result in a final deal, these people said.

The conversations illustrate how the Charlotte, N.C., lender is trying to get its arms around an array of woes linked to the 2008 purchase of mortgage lender Countrywide Financial Corp. That $2.5 billion deal saddled the bank with hundreds of thousands of delinquent borrowers and thrust it into the middle of the foreclosure-paperwork crisis last fall.

In late June, BofA announced an $8.5 billion settlement with a large group of mortgage-bond holders who lost money on mortgage-backed securities purchased before the U.S. housing collapse.
Bank of America and four other big banks have been in talks with state and federal officials about the ultimate cost of ending the foreclosure controversy since March. Progress has been slowed by a squabble among the banks over how to split the tab, with Wells Fargo & Co. telling government officials it should pay less than Bank of America or J.P Morgan Chase & Co., said people familiar with the matter.

As the discussions dragged on past the mid-June target set by U.S. officials, Bank of America began pressing officials for a speedy resolution, and it put forward its principal reduction proposal in one-on-one talks with state and federal officials. Meanwhile, negotiations continue with the banks as a group.

Bank of America has told officials it wants protection against future litigation relating to mortgage servicing, said people familiar with the situation. In exchange it is willing to agree to a program in which troubled borrowers would have to prove financial distress to qualify for a writedown of the principal owed on their mortgage.

The principal amount would have to be $1 million or less in certain geographic areas, one of these people said, and a reduction would apply to the bank's own mortgages and those its services for private investors. Borrowers who don't qualify for the reductions would still be eligible for transition assistance.

The more modifications the bank agrees to, the less it will pay in cash as part of an eventual settlement, one of these people said.

It isn't known if other banks, which are having their own one-on-one conversations with state and federal officials, have put forward similar proposals.