BofA wants to suspend some mortgage payments
CHARLOTTE, N.C. – Bank of America wants to give struggling mortgage customers who are collecting unemployment benefits up to nine months with no mortgage payment.
That’s right. Zero payment.
Customers would have to agree that, if they haven’t found a job within the nine months, they will sign over their house to the bank. The Charlotte bank would give them at least $2,000 to help with moving expenses.
The proposal needs regulatory approval, and the bank doesn’t know when, or if, that will happen.
Some experts say the plan could become an industry model and is the most substantial, creative approach yet to addressing the fallout from stubbornly high unemployment, which is driving mortgage delinquencies and foreclosures.
The plan also could provide families with faster relief, allow them to save money and provide a timetable for making decisions. The bank could avoid millions in collection and foreclosure expenses.
“It’s an innovative way for Bank of America to demonstrate it’s working with its customers,” said Mark Williams, a former Federal Reserve bank examiner. “Regulators should view this as a positive step as well.”
The $75 billion federal mortgage-aid program, announced in February 2009, has struggled to fulfill President Barack Obama’s estimate of helping millions. Through March, only 230,000 families had received final mortgage modifications under the Home Affordable Modification Program, called HAMP.
The program holds few options for the jobless, even as the U.S. unemployment rate hovers around 10 percent. The Charlotte area’s rate is near 13 percent. And more than 6.3 million people nationwide have been out of work longer than six months.
“It’s something I would have done,” said Bill Sagy, a Bank of America mortgage customer laid off last June from his management consultant position. “That would definitely have worked.”
Instead, he spent months working with the bank for reduced payments that he thought would become a long-term modification. But that didn’t happen, making him one of a growing group of homeowners who spent scarce resources that didn’t ultimately save their homes.
Sagy’s Huntersville, N.C., home, which he bought for $253,000 in 2006, has shed value and is unlikely to sell for what he owes. Without a modification, he’s behind on payments and says the bank wants to foreclose.
“It’s so frustrating,” said Sagy, who with his wife is considering relocating.
Mark Pearce, a leader in national foreclosure prevention efforts, called the plan a step forward.
“This seems like a new idea that offers a lot of positives for both the homeowners and the bank,” said Pearce, an N.C. deputy banking commissioner. “There’s a nice balance, giving people more breathing space but with a date certain for moving to the next step if things don’t work out.”
In addition to reducing worries, the program could, for example, mean families are able to keep current with a car payment and avoid repossession. Losing a car makes it harder to find or keep a job. Borrowers also might be better able to afford expenses such as child care, freeing them to attend job fairs and interviews.
The bank has 1.44 million customers who are 60 days or more past due, nearly 14 percent of the 10.4 million mortgages it services. But it hasn’t broken out how many of those might be helped by the proposed plan.