Bank of America to cut mortgage payments for struggling homeowners

Bank of America will cut mortgage payments for holders of sub-prime mortgages from Countrywide Financial, which Bank of America acquired in July. The move will reduce payments for struggling homeowners to no more than 34% of gross income. The plan is the result of a multi-state lawsuit against Countrywide for predatory lending practices. It is expected to benefit as many as 400,000 borrowers.

Full story by Les Christie at CNNMoney.com:

As the credit crisis continues, more and more lenders and mortgage servicers are coming to grips with the fact that preventing a foreclosure is usually cheaper than going through the repossession process and then reselling the property in a declining market.

Depending on each borrower's circumstances, Bank of America might freeze or lower a loan's interest rate or even cut the principal loan balance. The bank said it will also participate in the government's Hope for Homeowners program, a provision of the housing rescue bill which went into effect Oct. 1 and makes FHA-insured loans available for delinquent borrowers...