Banks Win Equity-Loan Reprieve in Settlement: Mortgages
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Bank of America Corp., Wells Fargo & Co. and three other banks that settled a nationwide probe of foreclosure practices this month will get a bonus from the deal: protection for $308 billion of home-equity loans they hold.
The banks that service about half the nation’s mortgages on behalf of investors will be able to share losses on their junior loans with bondholders and get credit toward the cash they pledged to spend in the settlement, said an Obama administration official involved in drafting the $25 billion agreement. Second liens would typically be wiped out before senior-mortgage investors take a loss, said Laurie Goodman, managing director at Amherst Securities Group LP in New York.