The program, while limited in scope and available by invitation only, signals a significant shift in efforts to deal with the millions of homeowners who are facing foreclosure. It comes as banks are being urged by the White House, members of Congress and community groups to do more to stem the tide.
The Obama administration is also studying whether to provide more help to people who owe more on their mortgages than their homes are worth.
Bank of America’s program may increase the pressure on other big banks to offer more help for delinquent borrowers, while potentially angering homeowners who have kept up their payments and are not getting such aid.
Citigroup is also said to be making such a consideration. So far, the program will be extremely limited.
This was a bone of a debate between myself and Wade Rathke. Rathke was adament that the reduction of balances was critical not only to giving borrowers an affordable mortgage but to show a correct balance sheet for banks.
That's because we've seen the reduction of real estate values and Rathke believes that mortgage balances need to reflect that or banks are showing assets that are simply not realistic.
I see all these programs as foolhearty and so this would only extend a misguided policy.