As a result of a settlement with state and federal government, Bank of America is writing down mortgage loan principal for about 200,000 Americans, sometimes as much as $100,000 per mortgage.
Banking is far more regulated than ordinary business. Bankers can’t invest and do business as they wish. They have to abide by a thicket of government regulations and be constantly on guard for attacks from interest groups who can lobby politicians and bureaucrats to do their bidding.
No wonder that bank stocks are in the toilet.
If the government regulated your business and you were as vulnerable to social and political pressure, you too would have a hard time staying afloat.
The USA Today reports:
Bank of America will reduce the amount owed by the homeowners as much as $100,000 in some cases. Only mortgages currently owned by Bank of America will qualify. Those owned by government entities Fannie Mae and Freddie Mac, or backed by the Federal Housing Administration will not be eligible.
The move will help the bank reduce the amount of penalties it owes to the government’s Housing & Urban Development agency by $850 million.
Those penalties were ntry to resolve investigations into abusive home lending and fraudulent foreclosure practices.
About 11 million American households are “underwater” on their mortgages, meaning they owe more than their homes are worth. The settlement with five mortgage lenders is expected reduce loans for only about 1 million of those homeowners and send checks to others who were improperly foreclosed upon.