Bank of America Cures Option Arm Defaults with Reverse Mortgages

October 21st, 2009 | by John Yedinak Published in Bank of America, News, Reverse Mortgage | 17 Comments

The Wall Street Journal is reporting that Bank of America has been able to save approximately 20 seniors from losing their homes due to defaulting on option arm products taken out during the housing boom.

Pedro Garcia, a 69 year old retired corrections officer owed about $490,000 on his Southern California home which was recently appraised at $150,000. Luckily for Garcia, Bank of America wrote down about $405,000 of his option ARM and used a reverse mortgage to pay off the remaining $85,000 balance.

Michael Drawdy, Bank of America’s senior vice president for home retention, told the WSJ the bank has issued approximately 20 reverse mortgages with write-downs to borrowers like Mr. Garcia who have "dire circumstances."

He says that though the bank loses money in this process, it would lose nearly as much by foreclosing on the home and selling it in today’s market.

According to the article, Housing counselors say Bank of America is playing a leading role in dealing with option ARMs and a reverse mortgage is proving to be a key tool to help seniors save their homes.

Another interesting aspect of the article is that Bank of America allowed a subordinate loan in Garcia’s deal. According to the WSJ, Garcia is making small monthly payments on a second mortgage that was modified by another lender.

There was discussion last about whether or not this was possible and it looks like lenders are using it in certain situations.

Fixing Troubled Mortgages for the Elderly (WSJ)

Technorati Tags: Reverse Mortgage,News,HECM,FHA,HUD,Bank of America

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http://www.celink.com/ John LaRose

Gee, maybe Consumer Reports, the NCLC, and Senator McCaskill will read this article and realize that reverse mortgages are not the “scourge of the earth” that they are trying to portray them as.

Kudos to Bank of America!!
dduck12

Get your seniors to quote the WSJ article and their personal experience with their RM to CRs website:
http://blogs.consumerreports.org/money/2009/10/…
and to CNNs website:
http://moneyfeatures.blogs.money.cnn.com/2009/1…
dduck12

Repent and ye shall be saved. After reading the posts to the WSJ article, I get the impression that the guy in the story MAY have gamed the system. I therefore, would not reference this article to a client.
treverse

dduck12:
I don't think the point is whether anyone gamed the system! The point should be that banks are willing to work with seniors and are saving seniors home's with Reverse Mortgages. This is the message that we need to get out to the media not individual clients.
As John Larose states Reverse Mortgages “are not the scourge of the earth.”
Let's look at the big picture!
dduck12

I agree. I just don't think anyone reading the blog replies will make the main point clear, indeed it might obscure it.
gciungan

I was shocked when I read this. I have a senior homeowner in an option arm and was negotiating with Bank of America to reduce the principle and pay off the new loan balance with a reverse mortgage. I even had a forensic mortgage audit done showing numerous RESPA, TILA, FTC and State Violations that took place during the origination of his option arm. They still refused to reduce the principle and use a reverse mortgage. The client has retained a lawyer that believes the homeowners has grounds for a predatory lending case against Bank of America. It seem Bank of America is talking out of both sides of their mouth.
jamesanelson

Type your comment here.
Dear gciungan: Why don't you contact Peter Bell and his NRMLA: He and his are supposed to be in your corner; perhaps they can do something
for your Client. Or maybe they just work totally for the lenders. Would be interesting to find out for the sake of an alleged Bank of America mistreated
Senior customer.
Anonymous

dduck12:rnI don’t think the point is whether anyone gamed the system! The point should be that banks are willing to work with seniors and are saving seniors home’s with Reverse Mortgages. This is the message that we need to get out to the media not individual clients.rnAs John Larose states Reverse Mortgages “are not the scourge of the earth.”rnLet’s look at the big picture! rn
Anonymous

I agree. I just don’t think anyone reading the blog replies will make the main point clear, indeed it might obscure it.
Anonymous

I was shocked when I read this. I have a senior homeowner in an option arm and was negotiating with Bank of America to reduce the principle and pay off the new loan balance with a reverse mortgage. I even had a forensic mortgage audit done showing numerous RESPA, TILA, FTC and State Violations that took place during the origination of his option arm. They still refused to reduce the principle and use a reverse mortgage. The client has retained a lawyer that believes the homeowners has grounds for a predatory lending case against Bank of America. It seem Bank of America is talking out of both sides of their mouth.
rmcounselor34

Type your comment here. It took us a year to convince Bank of America to accept a short payoff funded by a reverse mortgage in exactly the same kind of scenario. Our client was a 92 year old senior with an interest only 40 year Pay Option ARM that was made by Countrywide Mortgage. We finally settled and closed the HECM loan in March 2009. I guess B of A has finally seen the light.
Anonymous

Type your comment here.rnDear gciungan: Why don’t you contact Peter Bell and his NRMLA: He and his are supposed to be in your corner; perhaps they can do somethingrnfor your Client. Or maybe they just work totally for the lenders. Would be interesting to find out for the sake of an alleged Bank of America mistreatedrnSenior customer.
Anonymous

Type your comment here. It took us a year to convince Bank of America to accept a short payoff funded by a reverse mortgage in exactly the same kind of scenario. Our client was a 92 year old senior with an interest only 40 year Pay Option ARM that was made by Countrywide Mortgage. We finally settled and closed the HECM loan in March 2009. I guess B of A has finally seen the light.
REVGUYJIM

I think you will find that B of A is much more inclined to take the write-down on the existing mortgage if they are the ones placing the reverse.
Anonymous

I think you will find that B of A is much more inclined to take the write-down on the existing mortgage if they are the ones placing the reverse.
oldtimer2

“I think you will find that B of A is much more inclined to take the write-down on the existing mortgage if they are the ones placing the reverse.”

BINGO!
Anonymous

“I think you will find that B of A is much more inclined to take the write-down on the existing mortgage if they are the ones placing the reverse.”rnrn BINGO!rn

Bank of America Cures Option Arm Defaults with Reverse Mortgages

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