The action could help as many as 265,000 homeowners, Liam McGee, president of the Bank of America's (NYSE: BAC) global consumer and small-business banking unit, said Monday in Los Angeles at a U.S. Federal Reserve hearing on the pending purchase, Bloomberg News reported.
``No one benefits from a foreclosed home,'' McGee told Bloomberg News. ``It is bad business for banks.''
Bank of America's shares moved 10 cents higher to $38.40 while Countrywide (NYSE: CFC) gained 7 cents to $5.91 on the news in Monday afternoon trading.
Economist David H. Wang told BloggingStocks Monday he likes what he hears regarding the Bank of America's proposed plan, from both sector and macroeconomic standpoints. "It is a prudent move. It's not a move without costs, but in the long run the Bank of America will have more performing loans, which will benefit its bottom line," Wang said. "It's also good from a macroeconomic standpoint, because we know that people in their homes tend to buy furniture, appliances, and other home maintenance items. So the more people who are able to retain their homes, the better, for the U.S. economy." Wang added that he doesn't own shares in either BAC or CFC.
Get 'ball rolling in right direction'
Wang said he hopes other banks will follow suit "to the extent they are able to" and also agree to modify what he called "at-risk loans" - - those that are in danger of foreclosure, or near that stage.
"The Bank of America's pool contains 265,000 [borrowers]. Now imagine another 250,000 [borrowers] able to retain their homes, and maintain their homes, ...stay as functioning homeowners in their communities. That would have a significant stimulative effect on the U.S. economy," Wang said. "It would be a positive data point that would get the ball rolling in the right direction."
The Bank of America did not specify the costs associated with its plan, and Wang did not want to speculate, prior to a review of the bank's proposed initiative. However, Wang did say the plan "may not contain as high a cost for the bank as one might assume," if new mortgage terms enable the bank to recapture a portion of due principal/interest deferred.
In January 2008, amid the nation's worst housing slump in more than 15 years, the Bank of America agreed to acquire troubled Countrywide Financial, pending regulatory and shareholder approval. If approved, BAC said it would operate the combined company under the Bank of America brand name.
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Reader Comments (Page 1 of 1)
4-28-2008 @ 4:43PM
Tina Brown said...
I am realtor in Northern alifornia and have noticed the banks say they want to help the consumers, but I have first hand dealigns with non-responsivenss from bansk. I currently have a home that has been on the market since Novemebr 2007. We received an offer on the property 2/25/08, Countrywide has yet to respond to the offer and when you call, you can never get someone who can make a decision or even connect you with the negoiator assigned to the loan in default. DO the banks WANT to foreclose on the properties. It seems as though there is no organization to assit the consumers. If a consumer CLEARLY shows financial hardship and the bank has received a fair makret offer...what is the problem! On top of that, the consumer has PMI and the PMI company came out and did an appraisal in February and THEY TOO can't get an answer from Countrywide in regards to the short sale offer recevied. It would appear as though Countrywide wants to foreclose on the property.
4-28-2008 @ 5:04PM
Steve in Denver said...
I'm a builder / broker in Denver. I've too tried to communicate with lenders on land or sites. I've had an easier time contacting dead people than the banks. The couple of times I made contact I wound up talking to some dweeb that couldn't understand what I was talking about when I said "REO". The only worse situation is talking to some of the "workout" brokers who have some of these properties listed from the banks. A whole new meaning to "stone stupid".
4-28-2008 @ 7:00PM
william lindblad said...
The banks are running scared and it is sure thing that many are covering losses with creative bookkeeping. I am waiting until Wells Fargo makes it's next reporting as I think it should be interesting. The banks have no desire to get into the housing business through foreclosure but they don't want to write any more shakey loans either. They talk to anyone with 20% down and good credit, less than that and you have a problem.
5-14-2008 @ 11:51AM
helen said...
I too have a short sale offer to countrywide bank since last september 2007 and a valid offer , and it is true you cannot speak to the negotiator assigned to the loan it does make you wonder is it that countrywide rather the sale at the court than a short sale.