BAC's Moynihan Claims Principal Write-Downs Would Encourage Loan Defaults
Bank of America's chief executive Brian Moynihan is reportedly fighting a government proposal to force the bank to assume responsibility for billions of dollars in mortgage debt. Moynihan claims the proposed action would encourage homeowners to default on their loans, leaving millions of up-to-date borrowers, and BAC, to pick up the tab.
"There's a core problem that if you start to help certain people and don't help other people," Moynihan told BAC investors yesterday. "It's going to be very hard to explain the difference." Terry Laughlin, who is charged with overseeing BAC's Legacy Asset Servicing division, also spoke out against the proposal at the shareholder event Wednesday. "What do you do for those borrowers that have a job but have negative equity and have paid on time and honored their obligations?"
With looming investor lawsuits and the government's impending settlement over foreclosure improprieties looming, the nation's largest bank by assets announced Wednesday that it is creating a "good bank, bad bank" structure to segregate its worst-performing legacy mortgages, allowing its healthy home loans to stand alone.
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