A Bank of America branch in the Chicago Financial District. (Scott Olson / Getty Images )
Reporting from Washington —
Bank of America said Friday it would reduce by about $100,000 the amount owed by as many as 200,000 underwater homeowners as part of the recently announced government foreclosure settlement with top mortgage servicers.
BofA made the commitment as part of a $1-billion side deal to the $25-billion foreclosure settlement, said bank spokesman Richard Simon.
The principal reductions could eliminate the entire underwater portion of some mortgages that the bank services, with the average reduction expected to be more than $100,000, he said.
By cutting the amount owed on the mortgages, Bank of America could reduce the $3.25 billion in penalties it faces from the foreclosure settlement by $850 million. The details of the principal-reduction agreement were first reported by the Wall Street Journal.
Underwater homeowners are eligible if they have a loan serviced by Bank of America and were at least 60 days delinquent on their mortgages as of Jan. 31.
Only loans owned by Bank of America or private investors are eligible, and those include mortgages originated by Countrywide Financial Corp. The Calabasas, Calif.-based subprime lender was acquired by Bank of America in 2008.
Loans owned or backed by Fannie Mae, Freddie Mac, the Federal Housing Administration or the Veterans Administration are not eligible, Simon said.
Bank of America estimated about 200,000 homeowners will be eligible, though it does not anticipate all will take part in the program, Simon said.
The bank will begin reaching out to homeowners next month. It has three years to complete the principal reductions, but the settlement offers incentives for them to be completed within a year of the settlement's completion, so Simon anticipated the process would move "fairly quickly."
Bank of America mortgage customers can call 877-488-7814 to see if they're eligible and for more information.
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