Bank of America Foreclosures Expected to Rise

Bank of America has figured out a way to foreclose on even more homeowners.  According to a recent piece in The New York Times, a new deal between the lender and investors who bought its bad loans could lead to faster approval of loan modifications but also shorter foreclosure processes.  According to BofA exec Tony Meola,

“The goal is to reinstate as many borrowers in a modification that performs well.  It also is likely to lead to faster resolution in those unfortunate situations where foreclosure is inevitable…”

 Loans

The deal is reportedly worth about $8.5 billion and covers 275,000 mortgages, many written by sub-prime poster child Countrywide.  The deal includes a requirement for loan servicers to respond to loan modification applicants within 60 days of receiving their paperwork, as well as incentives for successful modifications.  It also will outsource the troubled borrowers’ applications from BofA to 10 “more efficient” subservicers such as SPS (Select Portfolio Servicing).  The hope is that loan modifications that have a reasonable chance of being successful will be processed more quickly, and that those that are not likely to work (or not likely to remain current on their payments) can be foreclosed more quickly, therefore recouping money for the investors sooner.

This all sounds wonderful, but does anyone really expect that adding another servicer to the mix will actually speed things up?  Sure, maybe the more efficient “subservicer” will help some parts of the loan modification (document collection and review, perhaps?), but BofA will still have to review the loan mod before it goes to the investor, right?

What frustrates me even more is that not once does the article mention short sales.  Why doesn’t BofA have these “subservicers” review the loan modification files for feasibility and then recommend them for short sale instead of foreclosure?  There are plenty of experienced real estate agents out there who would love to help the homeowner market the property and plenty of short sale attorneys who would love to negotiate the sale.  And this almost always results in more money for the lender/investor and less severe consequences for the seller.

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