Bank of America seeks refuge from lawsuits

With current lawsuits piling up and future lawsuits pending, Bank of America met with state and federal officials seeking protection from legal action over its mortgage practices in exchange for lowering monthly payments for homeowners struggling to pay off their loans.

The Washington Post reported Citigoup, J.P. Morgan Chase, Wells Fargo and Ally Financial are also speaking with officials on a similar agreement, but Bank of America is pursuing a separate deal. If Bank of America reduces the principal on mortgage loans it will lose money, but it will have to do this in order to receive any aid from federal officials.

Chris Gamaitoni, a mortgage industry analyst with Compass Point Research and Trading, told the news source that by reducing loan amounts for homeowners could increase the resale value of other homes Bank of America investors have interests in, which will strengthen the financial institution.

While private lenders are seeking aid for legal disputes, lawmakers recently sent a letter to President Obama urging the administration to extend the forbearance period for unemployed borrowers with mortgages owned by Fannie Mae and Freddie Mac. Currently, unemployed borrowers can qualify for a grace period between 90 and 180 days.

According to Housing Wire, The Federal Housing Administration and the Treasury Department have already required private mortgage servicers to offer a 12 month forbearance period for unemployed borrowers under the Home Affordable Modification Program.

The news source reported the government-sponsored entities own 50 percent of residential mortgages, and extending the grace period would enable struggling homeowners to keep their homes if they recently suffered a job loss.  

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