Bank of America Signs Up for 2nd-Lien Foreclosure Rescues

Bank of America, the nation’s largest lender, has become the first to agree to modify second-lien mortgages in a yet-to-start new component of the government’s much-criticized foreclosure rescue program.

“The formal action follows a verbal commitment to the program made by Bank of America’s Chief Executive Officer Brian Moynihan during a meeting with Treasury Secretary Timothy Geithner earlier this month,”  Bank of America said today in a statement.

But the U.S. Treasury’s Home Affordable Modification Program has yet to ramp up its second-lien component, nine months after announcing its pending creation in a news release that called it essential for “underwater borrowers” to stay in their homes. Underwater homeowners are those with homes valued less than the total amounted owed in mortgages.

Bank of America said today it has “systems in place to begin implementing the Second Lien Modification Program with the release of final program policies and guidelines by federal regulatory agencies, which is expected soon.”

A Treasury spokesperson this month said the second-lien program had seen delays “because there has not been a systematic method of notification to second lien holders when a first lien on the same property is modified.”

“For many homeowners facing severe financial difficulty, decreasing the payment on the first mortgage without a reduction in the payment on the second lien may not produce an affordable combined mortgage payment,” said Barbara Desoer, president of Bank of America Home Loans.

Bank of America is the nation’s largest mortgage servicer, with nearly 14 million loans – including about 3 million second liens.

BofA topped the list of servicers ranked by the number of modifications underway – 203,470 – through December, ahead of JPMorgan Chase, Wells Fargo, CitiMortgage and Saxon Mortgage Services, the Treasury reported. However, the top lender has come under criticism for its low placement rate, assisting about 19 percent of those eligible for modifications.

The HAMP program has come under heavy criticism from lawmakers, consumer advocates and mortgage industry experts for moving too slowly and not addressing principal reduction for the growing number of “underwater” homeowners, many of whom are prime borrowers.

The program’s overall placement rate, or the percentage of eligible borrowers assisted, is only 25 percent.

Using non-government programs, Bank of America said it modified more than 57,000 second liens to assist financially-strapped homeowners over the last two years.