A new program from Bank of America could allow unemployed mortgage holders to go for up to nine months without making a house payment.
In return, Bank of America would make homeowners hand over the deed to their home if they can't get a new job before the end of the nine-month long period.
Only people receiving benefits would be eligible for the program, according to The Charlotte Observer. The newspaper reported on the bank's new effort Sunday and says that before becoming a reality, regulators must first approve it.
The plan could be good for Bank of America's balance sheet because it would avoid principal reductions for borrowers that manage to keep their homes. The Observer reports:
The bank is betting that giving up nine months of income will pay off by enabling customers to find jobs and restart payments. Nine months is also roughly the length of time it would take for delinquent borrowers to lose their home. So, if customers in the new program can't find jobs, the bank could end up in about the same position as it would have been. And, in theory, the bank and customers will have avoided the draining collection and foreclosure process.
Customers who get a job during the nine months would have the unmade payments added to their mortgage, spread over the length of the contract. If the new job is at lower pay, they'd be eligible to apply for a mortgage modification to reduce payments.
Customers who lose their home would get at least $2,000 for handing over the keys to Bank of America, reports Housing Wire.
Last week, Bank of America representatives testified before congress that they were in favor of a limited use of "cram down," a practice that allows bankruptcy judges to impose a reduction in a borrower's mortgage principal during bankruptcy restructuring. Bank of America and Citigroup stand out among the nation's big banks for their support of the practice.