Bofa Executive Claims that Foreclosure Prevention Measures are Failing Because of Frequent Re-Defaults
The CEO of Bank of America Brian T. Moynihan said the attempts to halt foreclosures are frequently meeting with failure because 
over half the borrowers in some mortgage category are re-defaulting for a second spell. He said, “We’re reaching a point where some customers will be dealing with the reality that despite the myriad programmes and the best efforts of everyone in this room, and of our teammates working with these customers, foreclosure may be unavoidable”. He was speaking at a gathering of attorneys general in North Carolina’s Charlotte.
Investigations are being carried out against many big servicers, including Bank of America, by a team comprising of the attorneys general of all the states. The manner of their foreclosing is being questioned. The regulators have hinted at a penalty amounting to $20 billion to be levied on the mortgage industry; they also want the banks to reduce the principal amount for some of the house owners who have gone underwater with the worth of their house being less than the loan due amount.
The chief executive officers of the banks, including Moynihan and Jamie Dimon of JP Morgan Chase have spoken out against principal reductions saying that it is not fair apart from being difficult to enforce.
Fifty one year old Moynihan said that they did not think the policy of reducing principal to be sound and comprehensive. He explained that it would be difficult to explain to the vast majority who are current on the mortgages why a small proportion of delinquent clients should have their principal reduced.
Prior to this speech at a private lunch Moynihan however did not rule out the plan of principal reduction according to Lisa Madigan AG of Illinois and Greg Zoeller AG of Indiana who also attended the lunch. Moynihan wanted to know how the regulators would decide which borrowers would benefit from the reductions. In an interview Madigan said that the message at the private meet was that BofA wants the matter to be resolved so that it can move on.
Scott Silvestri, speaking on behalf of Bank of America based in Charlotte said, that the private remarks of Moynihan was a mirror of what he said during the time of the prepared speech. He said that Moynihan had lucidly and repeatedly focused on the many odd inherent in the plan of comprehensive reduction of principal.
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