Do you think BofA’s cramdown offers are likely to extend beyond 200,000 to greater numbers of underwater California homeowners?

  • No (70%, 52 Votes)
  • Yes (30%, 22 Votes)

Total Voters: 74

Bank of America (BofA) has begun offering principal reduction (cramdowns) to homeowners in compliance with the $25 billion settlement reached with state attorneys general this year.

BofA plans to mail cramdown offers to over 200,000 homeowners nationally. The estimated average reduction is $150,000 per homeowner, saving each candidate roughly 35% on their monthly mortgage payments.

A member of BofA’s executive management team hailed cramdowns as beneficial to homeowners, mortgage investors and entire communities. Cramdowns are also a boon to lenders such as BofA since they transform an unprofitable foreclosure into a long-term performing loan, he said.

To be eligible for a BofA cramdown, homeowners must:

  • have a home loan serviced by BofA;
  • have a loan-to-value (LTV) ratio of at least 120%; and
  • be at least 60 days behind on their monthly payments as of January 31, 2012.

These cramdowns will be granted in either three-year or five-year phases (depending on the loan), with an equal portion of the total principal reduced each year. If homeowners fall behind on payments during the cramdown process, their eligibility may be affected and the process halted.

first tuesday take

Redemption at last. Cramdowns are more profitable than foreclosures for lenders and stabilize communities while benefitting homeowners and investors? Wow. This is unexpected coming from the mouth of BofA’s executive management. Since BofA seems so happy to grant cramdowns to 200,000 homeowners nationally – roughly 30,000 in California – one wonders why a $25 billion settlement was necessary to force the lender to institute such a widely beneficial policy.

Further, why stop at 200,000? This is a pittance in national terms, and at the California level of 30,000, hardly more than two months of the state’s shortsale volume. If BofA truly had a cramdown epiphany, why not grant more than the settlement requisite — an act which would, by BofA’s own tortured logic, benefit even more homeowners, investors and lenders?

Related article:

Cramdowns, cramdowns, cramdowns!

One of BofA’s most admirable qualities is its perpetual smile of benevolence toward homeowners. In 2006, the lender was dedicated to giving every American their dream home, regardless of the buyer’s ability to repay the loan. In 2012, BofA “collaborated” with states’ attorneys general to find a solution to the negative equity plaguing the U.S. The result: another magnanimous gift from the lender to homeowners.

Related article:

Is $18 billion enough for California homeowners?

Ah, Bank of America: the homeowner’s champion. Is it just us, or does that smile look more like a grimace?

Re: “Bank of America Starts Mortgage Reduction Effort” from The New York Times