Bank of America to Modify Mortgages, Help Homeowners

April 28 2008 - Bank of America Corp., seeking approval of its Countrywide Financial Corp. takeover, said it will modify at least $40 billion in troubled mortgage loans over the next two years to keep customers in their homes.

The move would help as many as 265,000 homeowners, Liam McGee, president of global consumer and small-business banking, said today in Los Angeles at a U.S. Federal Reserve hearing on the pending purchase. The company is making $2 billion in donations to communities over the next 10 years, including funds for organizations giving advice on foreclosures, he said.

“No one benefits from a foreclosed home,” McGee said. “It is bad business for banks.”

Bank of America, based in Charlotte, North Carolina, is trying to persuade regulators to approve the $4 billion takeover, which would give it a role in one of every four U.S. home loans. Regulators and lawmakers have blamed Countrywide for lax lending standards that contributed to record U.S. defaults and then not doing enough to prevent foreclosures.

Bank of America rose 15 cents to $38.45 at 3 p.m. in New York Stock Exchange composite trading today. Countrywide climbed 7 cents to $5.91 and has declined 34 percent this year.

U.S. foreclosure filings jumped 57 percent and repossessions more than doubled in March from a year earlier, according to data vendor RealtyTrac Inc. A record 18.6 million U.S. homes stood empty in the first quarter, the U.S. Census Bureau said in a report today.

We Need to Hear More

About 100 people attended today’s hearing, which followed similar meetings last week in Chicago. Some speakers represent groups based in communities hit hard by the sagging housing market. U.S. home prices fell last year for the first time since the Great Depression.

“We need to hear more and they need to take a leading role,” said Rev. John J. Hunter, senior pastor at the First African Methodist Episcopal Church in Los Angeles. “They have not done so to this point.”

McGee said the combined company would permit residents to remain at properties for 60 days after foreclosure. If tenants leave voluntarily within 30 days, they will get $2,000 in cash, he said.

Wells Fargo & Co. and other banks have been more responsive to the mortgage issue in his community, Hunter said. His church is trying to establish a $50 million fund to help homeowners refinance, he said.

Both Bank of America and Countrywide have doubled their staffs to a combined 3,900 employees to handle troubled mortgages and this level will be maintained for a year after the acquisition, McGee said.

Bank of America said the headquarters of its consumer mortgage operations will be in the Southern California city of Calabasas, where Countrywide is based.

Bank of America to Modify Mortgages, Help Homeowners
by David Mildenberg and Peter J. Brennan | Bloomberg