Bank Of America Offers $40 Billion For Refinancing

Because of liabilities from its home equity loans, Bank of America has suffered a severe reduction in its earnings.

It wants to take over Countrywide and must put aside billions to cover its liabilities.

The bank needs regulator approval before it can take over Countrywide so its saying all the right things that politicians want to hear.

Just letting the market do its things is not popular.

You have to come up with gimmicks and phony promises.

In the end, the market will win out.

The Los Angeles Times reports:

Pushing to fast-track its takeover of wounded home-loan goliath Countrywide Financial Corp., Bank of America Corp. will promise today to help 265,000 troubled borrowers keep their homes over the next two years by refinancing or modifying at least $40 billion in mortgages.

Bank of America also plans to double its community development lending, which focuses on affordable housing, small businesses and people in low-income and minority neighborhoods, to $1.5 trillion over 10 years, said Liam E. McGee, the bank's top consumer and small-business executive. McGee is to unveil the commitments today while testifying at a Federal Reserve hearing on the bank's plan to buy Countrywide, the nation's largest mortgage lender, for $4 billion in stock. The combination would give Bank of America 25% of the U.S. mortgage market.

Once foreclosure proceedings begin, McGee said, Bank of America will stop adding late fees to the balance owed, and he said the bank would, when legally permitted, waive fees imposed by some mortgages when borrowers pay loans off early.

At a Fed hearing in Chicago last week, the bank said it would limit the use of prepayment penalties after the Countrywide takeover, greatly restrict loans on which borrowers don't document their incomes, and altogether eliminate sub-prime loans and mortgages that allow borrowers to pay less than the monthly interest, causing their loan balances to rise.

Bank of America quit writing sub-prime loans — those to risky borrowers whose credit histories or heavy debt loads preclude them getting traditional bank loans — early this decade.

Countrywide became the largest mortgage lender by striving to dominate all segments of the market, including sub-prime and "pay-option" loans, which allow borrowers to pay so little that their mortgage balance rises. Most foreclosures have been on sub-prime loans, but delinquencies on pay-option loans — which are written mainly to borrowers with prime credit scores — have risen dramatically