LOS ANGELES (Reuters) - Bank of America Corp (BAC.N) said on Monday that, as part of its acquisition of Countrywide Financial Corp CFC.N, it expects to modify at least $40 billion in mortgage loans to help homeowners.
The second-largest U.S. bank unveiled its plan at a public hearing on the $4 billion merger at the Federal Reserve Bank in Los Angeles, near where Countrywide is based.
Bank of America appeared to win cautious support from housing advocates and others who pegged Countrywide as the epicenter of the U.S. mortgage crisis, and who called on the central bank to approve the merger -- with strict conditions.
U.S. Rep. Maxine Waters of California, who condemned the Fed for failing to foresee the nation’s housing crisis, described the transaction as “one of the most important ... in recent memory” and warned Fed governors to “get this right.”
“I would be less than candid ... if I said I was filled with confidence that it would do so in light of the institution’s lackluster record during the run-up to this crisis,” she told a standing room-only hearing.
Waters said outside the hearing it was unclear whether the pledged $40 billion in loan modifications and “workouts” over two years was enough to stave off foreclosures for most homeowners who could stay current on mortgages with lower payments.
“It’s being advanced in a vacuum,” she said.
Bank of America expects the plan to help at least 265,000 customers stay in their homes.
California, especially the Los Angeles suburbs of Riverside and San Bernardino, have been hard hit by the subprime mortgage crisis, with some streets nearly emptied by foreclosures. Countrywide is based in Calabasas, another suburb.
Bank of America agreed in January to acquire Countrywide after credit markets tightened and borrower defaults soared.
The bank said it plans to operate the combined business under its own brand name and base the combined consumer mortgage operations in Calabasas. It expects to close the transaction in July.
Waters and housing advocates pressed the Fed to require Bank of America to present a detailed plan for dealing with as many as 600,000 “distressed” Countrywide homeowners, as well as the impact of the rising number of empty and foreclosed homes on communities.
“One thing that concerns and worries me is what are we doing in the short term?” said Orson Aguilar of the Greenlight Institute, a minority housing advocacy group. “Mitigation strategies have failed our communities. This is the perfect time for creativity.”
Doris Koo, chief executive of Enterprise Community Partners and who supports the merger, said the bank also should turn over foreclosed houses it cannot sell to nonprofit housing groups to be turned into low-income communities.
The housing advocates also said Bank of America and other banks should spend as much effort and advertising dollars on loan workouts as they do trying to attract new borrowers.
Outside the hearing, Alan Fisher, executive director of the California Reinvestment Coalition, and about two dozen protesters picketed to pressure the bank to provide fixed-rate, long-term mortgages on auction-value loans for qualified homeowners.
The bank should help those who cannot make payments with short sales of their homes to avoid damaging their credit, Fisher said.
“What they said is positive,” Fisher said. “But we came to oppose the merger unless there is a concrete plan for Countrywide borrowers.”
Additional reporting by Lilla Zuill; Editing by Andre Grenon