CHARLOTTE, N.C. -- Bank of America's top mortgage executive, testifying today before Congress, will release sobering details of home-loan delinquencies, including that "hundreds of thousands of customers" haven't made a payment in more than a year.
Barbara Desoer, president of the home loans unit, will update the Charlotte bank's progress in mortgage modifications. She will offer suggestions for improving the federal modification effort and explain programs the bank is developing, including more help for unemployed and poor borrowers.
She also will stress the need for options for people who simply can no longer afford their homes.
Desoer, who reports to Chief Executive Brian Moynihan, will testify before the House Financial Services Committee, which is looking at the effectiveness of the Home Affordable Modification Program, called HAMP.
That's the centerpiece of the nation's $75 billion foreclosure-prevention effort, which has been plagued by poor service and has struggled to help millions who have been out of work for a long time.
The hearing comes as the U.S. housing market and job growth remain weak. Foreclosures continue to bleed the economy, further depressing home values and leading to more foreclosures.
Perhaps one of the most telling signs: The bank is fielding more than 125,000 calls a day from people seeking mortgage help.
Bank of America expects a "considerable number" of customers to lose their homes in the next two years because of to unemployment and the large number of homes now worth less than the balance on their mortgages, known as being "underwater."
Nationwide, some 11 million homeowners fall into this group.
The bank, the nation's largest mortgage servicer, faces several lawsuits claiming it hasn't delivered on modifications. Distressed borrowers, lawmakers and regulators have railed against mortgage servicers in general for lost paperwork, poor communications and lengthy delays.
In response to growing criticism, Bank of America has sought to highlight its results, acknowledge what Desoer calls "growing pains" and show it is trying to improve.
One thing likely in its favor today: Committee chairman Barney Frank, a Democrat, praised the bank in an Observer interview last week, saying it has been "out in front recognizing the need for mortgage changes."
Bank of America has recently been an industry leader on several fronts, such as writing off principal on certain underwater loans and last week's pledge to speed responses for customers seeking modifications.
"We recognize the effect even one foreclosure has on the customer and community, and we will continue to help customers who want to stay in their homes and have the capacity to do so," says Desoer's testimony.
Other points Desoer will make in her testimony:
Nearly 33,000 of the bank's customers have received long-term HAMP modifications through March, an increase of more than 12,000 from the previous month. That's the bank's biggest monthly jump. And it's a far cry from the 98 reported in November, a number so puny that lawmakers and consumer advocates slammed the bank for not doing enough.
Bank of America is considering temporary payment-reduction periods of up to nine months for the unemployed. In March, the Treasury ordered a three-month reduction for those receiving unemployment benefits. The period could be extended to six months.
Almost 500,000 struggling loan customers have not supplied information or taken other basic steps to qualify for mortgage help. About half of them have not made a payment for more than a year, or owe more than 50 percent of the value of their homes.
The bank hopes new principal write-down programs and other changes will make modification offers more attractive. Bank of America has stepped up efforts to reach customers, including home visits.
Fully 1.44 million of its mortgage customers are 60 days or more delinquent - nearly 14 percent of the 10.4 million first mortgages the company services.
The bank says about 621,000 of those customers are potentially eligible for HAMP. That's about 43 percent fewer than the Treasury has estimated. That means the pool of people potentially helped is smaller.
143,000 delinquent borrowers have mortgage payments that are less than 31 percent of their income, making them ineligible for HAMP. Ordinarily, that's considered an affordable mortgage level.
However, of that group, 13 percent are "low-to-moderate income" customers whose mortgage payments take at least one-fourth of their income. Because their income is low, the money left after paying the mortgage isn't enough for living expenses.
The bank is working on its own modification program for this group. Desoer will suggest HAMP be extended to cover this type of loan aid, to increase the number of people helped.
The bank supports principal write-downs for underwater loans, but recognizes there are fairness concerns for the 86 percent of customers - some also underwater - who are current with their mortgages. Write-downs must be reserved for customers with a legitimate hardship, the bank says.
Home-equity loans and other second mortgages have been a problem for modifications and principal write-downs. Desoer will suggest requiring second-lien holders to write off a similar part of their loans.
The bank says the number of customers who won't be eligible for modifications "will be significant" and is considering higher pay outs for those who leave their homes. The bank pays a minimum of $2,000 to offset moving expenses.
