Wednesday, June 02, 2010

Report: BofA acknowledges "foreclosure can be very appealing to customers"

by Bill McBride on 6/02/2010 01:56:00 PM

From Diana Olick at CNBC: BofA: Mortgage Walkaways Have Huge Incentive

On the conference call ... this morning, BofA's credit loss mitigation executive, Jack Schakett, said the amount of strategic defaulters ... are "more than we have ever experienced before." He went on to say, "there is a huge incentive for customers to walk away because getting free rent and waiting out foreclosure can be very appealing to customers."

Schakett says the foreclosure process is still taking 13 to 14 months ... and so there's over a year of free rent.
emphasis added
This is just acknowledging the obvious - borrowers have "a huge incentive to walk away" and "foreclosure can be very appealing to customers".

On the conference call, BofA announced a new "Principal Reduction Enhancement" program for certain underwater borrowers. Here is the press release via MarketWatch: Qualified Homeowners Who Are Severely Underwater May Earn Forgiveness of Some Principal Over Three or Five Years
NHRP-eligible loans include subprime, Pay-Option ARM and prime-quality two-year hybrid ARM loans originated by Countrywide on or prior to January 1, 2009, if the amount of principal owed exceeds the current property value by at least 20 percent and the loan is 60 days or more past due.
This is really targeted at Option ARMs ... and I guess they are asking borrowers to stop paying so they can get a principal reduction.