Principal Writedowns Considered at Bank of America

Bank of America, which controls 21% of the servicing market, Wednesday unveiled a plan to consider principal writedowns for certain struggling mortgagors instead of cutting their note rates. In some cases principal will be reduced to 31% of a consumer's household income. At press time Bank of America was unveiling details of the plan, which falls under its National Homeownership Retention Program, its in-house proprietary loan modification effort. However, Bank of America mortgage chief Barbara Desoer warned that the new principal reduction effort would be "limited in scope" and will only be available to "certain eligible borrowers." The bank stressed that only "certain NHRP-eligible loans" will be subject to principal reductions. The mega-servicer is targeting troubled loans it inherited via its 2008 acquisition of Countrywide Financial. Bank of America said it would consider principal reductions on certain negative amortizing payment option ARMs and will convert some of these loans to fully amortizing products.