BofA to Pursue Loss Mitigation Under HUD Settlement

""Bank of America"":http://promo.bankofamerica.com/multiproduct/index2.html?cm_mmc=EBZ-EnterpriseBrand-_-Google-PS-_-bank%20of%20america-_-Bank%20Of%20America%20Exact and the ""Department of Housing and Urban Development"":http://portal.hud.gov/portal/page/portal/HUD (HUD) have reached a settlement regarding 57,000 delinquent government-issued mortgages serviced by the bank.

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Under the agreement, the North Carolina-based lender and servicer must pursue loan modifications with the 57,000 borrowers that it previously did not offer foreclosure alternatives. However, the company will not be held liable for foregoing such efforts in the past, though the actions are required by HUD.

For loans that would qualify for the ""Home Affordable Modification Program"":https://www.hmpadmin.com/portal/index.jsp (HAMP) if they were less than 12 months delinquent, BofA must pay the difference between the current delinquent status and a 12-month delinquent status if the borrower provides the necessary documents, according to a draft of the agreement obtained by ""_American Banker._"":http://www.americanbanker.com/issues/176_151/stevens-fha-bank-of-america-gaither-hud-mortgage-settlement-1040918-1.html?zkPrintable=1&nopagination=1

According to standard HAMP qualifications, a borrower must be less than 12 months delinquent.

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Borrowers not eligible for HAMP or other loan modifications will receive $4,000 if they complete a short sale and $7,500 if they complete a deed-in-lieu of foreclosure.

Borrowers unable or unwilling to participate in any loss mitigation opportunities will still face foreclosure, and BofA will still be able to file insurance claims with the ""Federal Housing Administration"":http://www.fha.com/ (FHA).

However, BofA will not make claims on any taxes, liens, or property preservation costs accrued between November 2010 and July 2011.

If the cost of paying down mortgages to qualify for HAMP modifications totals less than $10 million, BofA will pay the difference to HUD. However, if the cost exceeds $10 million, BofA will not be required to pay HUD.

The agreement also requires BofA to provide HUD quarterly updates on its communication and loss mitigation attempts with borrowers.

Within 30 days of July 11, when the agreement was signed, BofA must begin to reach out to borrowers to pursue loss mitigation.

The loans addressed in the settlement account for 4 percent of the total FHA loans currently serviced by BofA, according to _American Banker. _

HUD did not seek for BofA to admit error, nor did it seek large monetary reparations. HUD also agreed to waive pending administrative actions pertaining to lacking loss mitigation efforts.

However, the agreement does not prohibit HUD from pursuing damages for any unrelated servicing and origination violations.