HUD has reached a settlement with Bank of America, releasing the company from liability for failing to adequately provide alternatives to foreclosure on 57,000 delinquent government-insured mortgages. The agreement was created on a separate but parallel track from continuing settlement talks between Bank of America, state attorneys general, and other regulators over alleged mortgage origination and servicing failures.
The agreement requires the bank to waive a minimum of $10 million in unpaid mortgage payments and vet each of the 57,000 delinquent borrowers for a possible loan modification, short sale, or other foreclosure alternative.
After such outreach, the settlement paves the way for BofA to foreclose on homes that borrowers could not afford even after a mortgage modification and those that have been left vacant by owners.
The agreement is HUD's first involving settlement of claims in which a servicer failed to offer loss mitigation to borrowers. It does not, however, prevent HUD from seeking damages from BofA for unrelated origination and servicing failures.
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