Bank of America (NYSE:BAC) CEO Brian Moynihan said at the National Association of Attorneys General that cutting the principal for mortgage borrowers won't help in the foreclosure mess America is facing.
Moynihan rightly noted that there was no way the reduction in principal could be done in a fair manner, as those that have been responsible with their payments would receive the message that it pays not to pay.
While not saying it, there is the strong possibility a slew of lawsuits would follow, or demands that those paying their mortgages on time and up to date would want their principle reduced as well.
Lawsuits would surely follow from shareholders as well, as the banks would take an enormous hit if they were to roll out this type of plan.
He's right of course. Banks and shareholders have no obligation to pay for borrowers who took out money against their homes at the top of the market. They made the choice and now should have to live with the consequences. To reward poor choices is to create a future that would be even worst than the past and present we now face in the sector.
"We're reaching a point where some customers will be dealing with the reality that despite the myriad programs and the best efforts of everyone in this room, and of our teammates working with these customers, foreclosure may be unavoidable," he concluded.
Bank of America was trading at $13.42, down $0.05, or 0.37 percent, as of 10:22 AM EDT.
Wednesday, April 13, 2011
BofA (BAC) CEO Says Principal Reduction not Mortgage Solution
Labels:
Bank of America,
Brian Moynihan
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