CHARLOTTE, N.C. – Bank of America Corp. is pursuing a settlement that could reduce loan balances for struggling homeowners in exchange for a release from legal claims against the Charlotte bank, a person familiar with the matter said Wednesday.
The talks are separate from ongoing discussions between five major lenders, including Bank of America, and federal officials and state attorneys general. It’s unclear when either set of talks will conclude and whether they will result in agreements.
Since allegations of foreclosure-related errors emerged last fall, federal officials and state attorneys general have been haggling with Bank of America and the four other banks over a pact that could include $20 billion or more in penalties.
Banks have resisted a push to reduce principal owed by homeowners behind on their payments. One concern is that borrowers in good standing will stop making payments in order to lower their balances.
Of the 14 million loans serviced by Bank of America, half are owned by Fannie and Freddie. One-quarter are owned by the bank, and another quarter by private investors. Borrowers with a balance of $1 million or less and who live in their homes would be eligible. The homeowner’s monthly mortgage debt would have to be equal to 25 percent or more of their monthly income.