B of A Offering 20% Reductions in Principal

Bank of America said it will grant certain underwater homeowners principal reductions of up to 20% through a new wrinkle in its National Homeownership Retention Program. Only delinquent borrowers that received subprime or payment option ARM loans from Countrywide Home Loans are eligible for the principal forgiveness. B of A bought CHL almost two years ago, inheriting roughly $60 billion in problem loans. Jack Schakett, a credit loss mitigation executive at the bank, estimates that B of A will make 40,000 principal reduction offers under NHRP over the next few years. In response to a question from National Mortgage News, he said, "It's difficult to predict how many customers will take the offer." The Treasury Department is rolling out a similar initiative shortly with Fannie Mae and Freddie Mac expected to unveil their principal reduction program by the end of summer. Schakett said most investors have signed off on the initiative.