Addressing another demand by the advocacy groups, McGee said the bank would be willing in some circumstances to write down the principal on mortgages to keep borrowers from becoming discouraged and defaulting because their loans are so far "underwater."
Countrywide reported $1.6 billion in losses during the second half of 2007. Bank of America agreed in January to buy the Calabasas-based lender, and Bank of America Chief Executive Ken Lewis has continued to defend the acquisition as strategically wise despite complaints by some stockholders that the risks are too great.
Bank of America quit writing sub-prime loans -- those to risky borrowers whose credit histories or heavy debt loads preclude them getting traditional bank loans -- early this decade. But it was burned badly in the related business of creating debt securities out of risky mortgages. As of April 1, the bank had recorded $8.2 billion in write-downs on sub-prime-related holdings and loan losses, the fourth-largest total of any U.S. banking firm, according to a tally by Bloomberg News.
Countrywide became the largest mortgage lender by striving to dominate all segments of the market, including sub-prime and "pay-option" loans, which allow borrowers to pay so little that their mortgage balance rises. Most foreclosures have been on sub-prime loans, but delinquencies on pay-option loans -- which are written mainly to borrowers with prime credit scores -- have risen dramatically.
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scott.reckard@latimes.com
