Tens of thousands of Bank of America’s most distressed borrowers could be evicted and lose their homes more quickly as a result of a proposed settlement between the bank, which is the country’s largest mortgage servicer, and investors in its troubled mortgage securities.
For struggling borrowers in better financial shape, the outcome could be more positive: the deal would include incentives for mortgage servicers to help homeowners who have fallen behind on their payments and whose homes are worth less than they borrowed.
“The goal is to reinstate as many borrowers in a modification that performs well,” said Tony Meola, a servicing executive with Bank of America [BAC 10.36 0.01 (+0.1%) ]. “It also is likely to lead to faster resolution in those unfortunate situations where foreclosure is inevitable. While not a desirable outcome, the recovery of the housing markets depends on moving through the foreclosure process as quickly and fairly as possible.”
While powerful investors stand to benefit from the $8.5 billion settlement over the bank’s bundling of shoddy mortgages as securities, the fallout for the nearly 275,000 borrowers who took out those loans depends greatly on how deep they are in the foreclosure process and whether they earn enough money to dig themselves out.
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