Friday, June 18, 2010

Bank of America’s No Job, No Payment Plan

Image ID 228303 by Stock Exchange user brokenarts(picture credit to StockExchange user brokenarts)

This is an opinion piece.

From the Charlotte Observer:

Bank of America wants to give struggling mortgage customers who are collecting unemployment benefits up to nine months with no mortgage payment.

That's right. Zero payment.

Customers would have to agree that, if they haven't found a job within the nine months, they will sign over their house to the bank. The Charlotte bank would give them at least $2,000 to help with moving expenses.

The proposal needs regulatory approval, and the bank doesn't know when, or if, that will happen.

Read more:

Personally, I think this sounds monumentally stupid.

I bet lots and lots of people could spend more than 9 months looking for a new job. What if the homeowner found a job in the beginning of month number 10?

Let’s imagine I’m a VP for BofA and I manage the Phoenix, San Diego and/or Las Vegas regions. These are regions where many (possibly most?) home mortgages are underwater.

If I’m that BofA Veep, I’m way better off financially to let homeowners skip a year or more of payments – and add those payments on to the back end of the mortgage, eventually getting my money anyway – than take back the house and try to sell it on the open market myself.

Let’s see…

  • Not only will BofA spend money on attorneys and clerks to setup this “no job, no payment” plan. . . .

  • they’ll spend money on attorneys and clerks to handle the foreclosure or deed in lieu sale. . .

  • they’ll give the former homeowner $2,000 cash to walk away. . . .

  • AND they’ll try to sell the house for the going market rate that’s likely less than the mortgage the homeowner just walked away from.

Maybe this would work in other parts of the country where tons of homes aren't underwater. But good grief! BofA in the intermountain west must have money to burn. Did Bank of America repay their TARP funds?? Oh yeah. They did. All $46 billion of it.

By the way, the Charlotte Observer quoted lots of people who called this “innovative” and other kind words like that. It’s not innovative, it’s as old as contract law. It’s called forbearance. I asked Bank of America for a forbearance plan in December 2007 lasting only 45 days. They declined me. Their reason? "Insufficient income." You blanking idiot, that's why I asked!

My, my, how times change!