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Bank of America Defends its Record of Helping Homeowners

Bank of America is doing damage control after its spanking yesterday by the feds over moving too slowly to help homeowners stave off foreclosure through the government's Home Affordable Modification Program. A fusillade of bad press prompted the company late yesterday to issue the following statement by Barbara Desoer, president of B of A's home loans division. In the spirit of fairness, here it is in its entirety, with nary a wisecrack from your humbled narrator:

Bank of America is committed to the success of the Home Affordable Modification Program program and helping homeowners avoid foreclosure whenever a borrower has the ability to make a reasonable mortgage payment and the desire to remain in their home.
The Treasury Department's initial Servicer Performance Report reflects Bank of America's recent conversion positioning Making Home Affordable as the centerpiece of our modification efforts. Yet, already, Bank of America accounts for one in every four trial modification offers extended through the entire program - the leading indicator for homeowners that will ultimately enter the trial modification program and be eligible for final modifications.
Importantly, this report is not intended to capture each servicer's progress outside of MHA in stemming the tide of foreclosures. In the first half of 2009, Bank of America completed 150,000 modifications through our own programs as we ramped up to make MHA operational. These 150,000 homeowners were at serious risk of foreclosure, but today remain in their homes with an affordable mortgage payment. These additional programs are essential to address the myriad of complex issues homeowners face.
Despite our aggressive efforts to find solutions for homeowners in default, we must improve our processes for reaching those in need. Additionally, we continue to work with Treasury to find solutions for at-risk homeowners who fall outside the eligibility requirements of the current program as well as the growing number of customers now unemployed.
Bank of America has not proceeded with foreclosure sales for customers with whom we have established contact that may be eligible for a modification under Making Home Affordable or our other modification programs.
Desoer, a 32 year veteran of B of A, has a hellacious job. Formerly the company's chief technology officer, she was promoted last summer to head B of A's mortgage operations after it completed a $4 billion purchase of Countrywide, formerly known as the place where subprime mortgages went to die. And getting up to speed quickly on a complex program like HAMP is tough.

It's also fair to ask whether HAMP is well-designed. For example, does it provide a financial incentive for banks to participate (nope). Likewise, does tweaking interest rates on an upside-down mortgage do much to arrest a steep slide in the value of that property (nope again).

Here's the thing -- as it eagerly told us in July, B of A is doing pretty well, earning $3.2 billion in the second quarter and $7.5 billion for the first half of 2009. On the credit side, it extended $211 billion in loans, up sequentially from $183 billion. That included $111 billion in first mortgages, up 30 percent from the previous quarter; notably, 29 percent of those loans were for folks buying their first home, a strong sign for the housing market.

Yes, the portfolio still has trouble spots. In its home loans and insurance unit, total revenue for the quarter was down 15% from the previous quarter, to $4.5 billion. And credit quality, especially with commercial real estate, remains a major concern.

But the word the company is putting out to The Street is that its mortgage business is just fine. "Mortgage banking income remained elevated due to high levels of home loan production," CEO Ken Lewis told analysts in its July 17 earnings call. Even Coutrywide is providing a "significant contribution to revenue," he said.

Great. Now it's time, as Desoer said, for B of A to "improve our processes for reaching those in need."

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