Bank of America announced yesterday that it would begin forgiving some mortgage debt in an attempt to keep borrowers in financial trouble from losing their homes, the New York Times reported today.As much as 30% of the principal balance of certain loans could be forgiven as part of the program, which is not available to all Bank of America mortgage customers.
The limited program which is available by invitation only, signals a significant shift in efforts to deal with the millions of homeowners who are facing foreclosure. Bank of America’s program may increase the pressure on other big banks to offer more help for delinquent borrowers. However, this could be at the risk of angering homeowners who have kept up their payments and are not getting such aid.
It’s a shame that Congress defeated a change to the Bankruptcy Code that would have allowed distressed borrowers to modify their home mortgage loans in Chapter 13. That would have been a much better fix for the housing industry, and would have been equally available to all homeowners across the country, as opposed to only certain ones, as in the case of this Bank of America program.