By RUTH SIMON and NICK TIMIRAOS
More than 200,000 financially strapped households will have a chance to sharply reduce their mortgage balances under a side deal negotiated byBank of America Corp. that could allow the bank to avoid as much as $850 million in penalties.
Under the arrangement, part of the recent $25 billion settlement of alleged foreclosure abuses between government officials and five large lenders, Bank of America will make deeper and broader cuts in balances than other banks.
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Under the broader settlement,banks must provide at least $10 billion in principal reductions. They receive full credit for reductions on loans they own and 45% credit on loans owned by investors. Under its deal, Bank of America must continue to offer principal reductions to all eligible borrowers even after it meets its formal obligations under the settlement, the Obama administration official said.Government officials hope that the broader settlement will pave the way for more widespread principal reductions.
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