CHARLOTTE, N.C., Dec 15 (Reuters) - Bank of America Corp's
foreclosure process will regain speed in January after being
stalled for nearly three months over allegations the industry
cut corners on home repossessions, the bank's home loans chief
said on Wednesday.
The largest U.S. mortgage servicer and bank by assets halted
foreclosures nationwide in October during a public firestorm of
criticism that banks did not properly review documents before
attempting to take back borrowers' homes.
Bank of America went further than other large lenders like
Ally Financial and JPMorgan Chase & Co, which confined their
temporary halts to the 23 states that require judicial reviews
of foreclosures.
U.S. banks have foreclosed on over 3 million homes since
2007, according to data from RealtyTrac.
Last week, Bank of America began refiling documents on
16,000 foreclosure cases in the 23 judicial states. The homes
included in the first wave of refilings are vacant or owned by
investors.
"We feel comfortable with the results we're getting, so
starting in January you will see a ramp" up in foreclosure
filings, Barbara Desoer, president of Bank of America's home
loans business, told Reuters in an interview.
The refilings are the first major push by the bank to
restart its foreclosure process since October, when the bank
said it was partially lifting its halt.
Bank of America ultimately plans to refile documents in
102,000 foreclosure cases in the judicial foreclosure states.
In the 27 states where a court proceeding is not required to
foreclose, the bank projects roughly 30,000 foreclosures will
be delayed in those states.
Desoer's comments come as the bank is engaged in settlement
talks with a group of investors on more than $16.5 billion in
bonds backed by mortgages. The investors allege the bank
misrepresented the quality of the underlying mortgages.
The bank is also currently part of a 50-state attorneys
general probe into the industry's foreclosure practices, led by
Iowa Attorney General Tom Miller. Desoer declined to comment on
the status of the investigation.
SILVER BULLET
In a wide-ranging interview, Desoer also dismissed some
suggested mortgage industry overhauls being floated by
regulators and industry rivals as possible solutions to the
foreclosure crisis, including principal reductions on
mortgages.
"I don't think it's the silver bullet," said Desoer. "Each
customer is different."
Bank of America has modified 746,000 mortgages nationwide
since January 2008, both through its own programs and the Home
Affordable Modification Program, or HAMP, created by the U.S.
government.
Banks that service mortgages are often barred by outside
investors who own the loans from reducing the outstanding
principal.
Banks are also hesitant to reduce principal, because the
practice forces larger losses on a mortgage than changing the
interest rate.
Desoer said principal reductions would only affect a
relatively small number of borrowers in their homes, outside of
states like California, Nevada and Florida that were hardest
hit by housing price declines. Those borrowers' home prices
have typically declined by 25 percent or more of the mortgage
value, which is known as being underwater.
Instead, she said, BofA is focused on getting customers to a
31 percent debt-to-income ratio and keeping modified mortgage
payments manageable.
"Underwater borrowers are highly, highly concentrated. When
you take those states out, its only about 7 percent of
borrowers (that) are underwater," she said. "I'm not saying
those borrowers aren't important, but it is a highly
concentrated issue."
SECOND LIENS
Desoer also rejected suggestions that servicers like Bank of
America should be barred from holding a second lien -- such as
a second mortgage or home equity loan -- on the same property.
Federal Deposit Insurance Corp Chairman Sheila Bair has said
publicly such relationships create conflicts for banks, because
modifying the first mortgage often means banks have to write
down their own second liens on a house.
Such writedowns could mean billions in additional credit
costs for banks, critics argue, making them reluctant to modify
primary mortgages.
"I don't think there's conflict and I think we've
demonstrated that with the number of second lien modifications
that we do," Desoer. "I disagree with the fact that there is
conflict."
(Reporting by Joe Rauch)