Bank of America Starts Mortgage Reduction Effort

By Felix Salmon: This is an important milestone, even if it's too little, too late: Bank of America Home Loans has begun reaching out to customers who may be eligible for forgiveness of a portion of the principal balance on their mortgage under terms of a recent settlement…

Felix Salmon submits: BofA’s “earned principal forgiveness” program looks very similar to the Responsible Homeowner Reward plan of Loan Value Group that I wrote about yesterday.

As part of the $25 billion settlement over mortgage “robo-signings,” Bank of America offered an average $150,000 reduction in loan balances. More than half the 60,000 offers went unanswered.

Q1 was another quarter in which recent patterns in household debt continued. As we report every month, non-housing revolving credit balances continue to be flat, although we now have some more granularity, with the Fed adding that the "number of credit inquiries within six months – an indicator of consumer credit demand –declined again the bulk of household leverage driven by non-revolving debt."  Specifically, "there were 158 million inquiries in 2013 Q1, down from the 164 million inquiries seen in the previous quarter."

In February, five of the nation's largest banks agreed on a $25 billion settlement over widespread, systemic mortgage fraud and related issues. The $25 Billion Deal, announced with huge fanfare, was supposed to help up to a million struggling homeowners, primarily via debt forgiveness. Let's flash forward a few months to see how debt forgiveness is working out in practice.