Low-income homeowners and distressed mortgage borrowers hardest hit by the foreclosure crisis and its aftermath will be the primary targets of $7 billion earmarked for consumer relief as part of Bank of America's$16.65 billion settlement with federal and state authorities.
Bank of America agreed to dole out all the aid by Aug. 31, 2018. The relief will include reductions in mortgage principal and forbearance, mortgage lending to low- and moderate-income families, renewing depressed areas, and expanding affordable rental housing. Half of required mortgage modifications must be made in the hardest-hit communities.
Bank of America could fulfill its obligation without spending the $7 billion, as providing certain kinds of assistance will earn it extra credit. For example, every dollar donated to a non-profit to rehabilitate an abandoned property will equal $2 in credit.
Six states -- California, New York, Illinois, Delaware, Maryland and Kentucky -- that brought claims against Bank of America will get specific allotments. California and New York will each get $500 million, Illinois, $100 million, and the other states will share $150 million.
A statement from Florida Attorney General Pam Bondi says that state will receive $1 billion.
Bank of America will also hold community outreach events each year to seek out additional eligible consumers across the country who may qualify for relief.
The significant consumer-relief component is heartening, says Andrew Jakabovics, a former federal housing official who now works for Enterprise Community Partners, an affordable housing non-profit organization.
In New York, Attorney General Eric Schneiderman lauded the settlement for providing relief to borrowers of mortgages backed by the Federal Housing Administration. A statement from his office said about 23% of distressed New York borrowers have loans from the FHA.
Consumer advocates say the problems the relief addresses are much bigger than the settlement's reach, but they also say it goes further than past ones, with big banks targeting the neediest borrowers and communities.
"I think that this consumer-relief settlement, in a number of ways, is likely to provide more and deeper relief to borrowers and neighborhoods that were most affected by the foreclosure crisis," says Paul Leonard, the California director of the Center for Responsible Lending.
Borrowers whose loans are owned by Bank of America may see even more benefit. Eligible borrowers receiving a reduction in loan principal will wind up with a loan whose interest rate is 2% or less, and at least 25% equity in their home.