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Bank of America Ups Its Foreclosure Prevention Efforts

Embattled Bank of America and other major mortgage lenders are expected to show improved results in a government report today on its main program to prevent home foreclosures.

BofA, which faces lawsuits and investigations by lawmakers and regulators over its takeover of Merrill Lynch, including a bonus scandal, last year, increased the number of customers with a trial mortgage modification by 62% in September to 95,000, according to a document obtained by CNBC.com

The nation’s biggest bank also increased the total number of modification offers under the Home Affordable Modification Program to 156,000 last month, versus 125,338 in August, saying its overall efforts "continue to grow."

A Bank of America branch.
Nell Redmond
A Bank of America branch.

The Treasury Department Thursday will release its third month of data for all of the nearly four dozen mortgage loan servicers participating in the program, which was launched with great fanfare in the spring.

The BofA data contained in the document is consistent with that in the monthy Treasury reports. The September report is due out about 1 p.m. ET.

The government set a goal of 500,000 completed modifications for Nov. 1. (The initial goal was for 3-4 million in the first two years.) The BofA document says the bank hopes to notch 125,000 by Nov. 1.

Data on success rates at this point is limited and in a way lagging. The program is barely six months old and its terms require that a modified loan stay current for three months to be considered a success.

BofA was among those banks criticized for poor results at the onset of the program, when it became apparent that the administration would not meet its original goal. While admitting to the usual start-up problems, White House officials still blamed servicers for the poor showing and asked them to redouble their efforts.

Servicers and administration officials have had several meetings on the subject since the launch of the program, and will meet again this afternoon, according to a source familiar with the situation..

Treasury has been making such data public since August, when it released results for July. As of August, 260, 65 modifications had been imitated.JPMorgan Chase had the most underway as of August—106,288. A total of 571,354 modification offers had been made by participating firms.

Industry and government efforts to contain the foreclosure problem are being thwarted by rising unemployment, which is squeezing homeowners, and forcing more to become delinquent on their loans.

“With sustained high unemployment, even the most aggressive loan modification program will not help where there is no income,” the BofA document states.

The government program also includes a refinancing component, which is meant to decrease the number of potential defaults. BofA says that as of September it has taken more than 144,000 applications in that category and funded some 60 percent of them.

According to August Treasury data, the bank has the largest number of loans that are 60 days or more past due (836,000)—a key benchmark of delinquency and foreclosure barometer. BofA says it has

Foreclosures continue to run at a record rate, despite a multitude of government and private programs. The problem has spread well beyond its original flash point, the subprime sector.

The Obama administration launched the massive, $75 billion Making Home Affordable Program in the early spring, replacing a Bush era onethat was widely considered a flop.

In all, the government hopes to assist as many as 7 million to 9 million needy homeowners, through loan refinancing or modification. About 85 percent of the estimated 55 million outstanding mortgages are covered under the program.

The program is designed to help homeowners already in trouble (the loans have become delinquent) and those who may be heeded for it. Loan services receive a fee of $1,000 per loan modification. In addition, they receive a $1000 a year for three years if the modified loan stays current.

The program also covers underwater borrowers. The loan-to-value ratio, which started out at 105 percent, is now 125 percent, meaning a homeowner with a $250,000 loan on a property valued at $200,000 is eligible for refinancing aid.

BofA CEO Kenneth Lewis announced last week that we would step down ahead of schedule.

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  • Diana Olick serves as CNBC's real estate correspondent as well as the editor of the Realty Check section on CNBC.com.

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