Industry News

Feds looking to help upside-down borrowers

BofA backs Dodd plan to buy up loans at a discount

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Bank of America officials have reportedly gotten behind a plan to create a Federal Homeownership Preservation Corp. that would buy billions in mortgages that might otherwise end up in foreclosure. In a proposal to congressional lawmakers, BofA officials warn that up to $739 billion in mortgages are at risk of default in the next five years, and that the government intervention is needed, the New York Times reported. BofA is backing a proposal by Sen. Chris Dodd, D-Conn., to create a government-chartered corporation that would buy up troubled mortgages from lenders and investors at a discount, and move homeowners into 30-year fixed-rate mortgages backed by Fannie Mae, Freddie Mac or the Federal Housing Administration (FHA). As envisioned by Dodd, the Federal Homeownership Preservation Corp. would need $10 billion to $20 billion in startup capital, and then be self-sustaining. Dodd maintains such an effort would not constitute a bailout of lenders and investors, because o...