Remember that $25-billion settlement between state officials and big banks over hinky mortgage practices? Beleaguered homeowners are finally getting a piece of the action.
Bank of America is sending letters to thousands of homeowners with an offer to forgive a portion of the principal balance on their loans by an average of $150,000 each. The reduction could amount to monthly savings of up to 35% on mortgage payments.
The bank says it plans to contact more than 200,000 homeowners who could be candidates for the offers. To be eligible, you need a loan owned or serviced by BofA, owe more on the mortgage than your property is worth and be at least 60 days behind on payments as of the end of January.
This is a good start, but BofA and other banks can do more. Although personal responsibility is important, the simple fact is that the economy won't find its footing until the housing market stabilizes. And that won't happen until the foreclosures ease.
You'd think banks would figure out that keeping people in their homes ultimately works to everyone's benefit, including the bank. Mortgage giant Freddie Mac crunched the numbers and determined that the typical foreclosure costs lenders about $60,000.
Multiply that by the millions of homeowners struggling to make ends meet, and you can see that banks have a powerful incentive to be more flexible on mortgage terms.
To date, though, they've had to be pushed and prodded to step up. They should rethink their foot-dragging strategy.