In May, Bank of America began sending letters to 60,000 homeowners, offering to take an average of $150,000 off their loans, in an effort to meet terms of the $25 billion industry settlement over foreclosure abuses, according to a Bloomberg Businessweek article.
However, the bank received an unexpected response – nothing. Dan Frahm, a Bank of America spokesman told the news source that over half of the homeowners have not responded, due to what he called "borrower fatigue."
"The number of customers responding is lower than we expected, given the significant assistance available," Frahm said. "We are working very hard to determine why response rates are lower than expectations."
Frahm went on to say that the second-biggest U.S. lender by assets will offer principal reductions to nearly 200,000 clients by August. In addition, Bank of America will offer cash incentives to sell a delinquent borrower’s home for less than the amount owed and it will create a pilot program designed to turn owners in to renters.
Overall, foreclosures will continue to have a huge impact on the housing market, according to a CNBC article. With high demand from investors and first-time buyers looking for a deal, home prices are being driven up and supplies are dwindling.
For example, 35 percent of home sales in Minneapolis are foreclosures, an increase from 13 percent over a year ago, reported CNBC. In Columbus, 34 percent of sales were foreclosed properties and prices rose 14 percent.
Lenders would be well-advised to learn from larger banks mistakes and ensure that they stay on top of each borrower's mortgage. The difficulty of this can be eased by investing in loan management software as well as an amortization calculator to ensure that the proper repayment plan is created for each individual and that payments are always made in a timely fashion.