Countrywide (BofA) refinance details

Countrywide and BofA have provided some details on their refinancing plans for subprime borrowers.

It appears these modifications are possible for buyers who owe at least 75% of the value of their home, and who have missed 60 days of payments and who bought sometime in 2005-2007. And why not "miss" 60 days of payments? Look what you can win!

Terms mentioned include:

1. All borrowers are encouraged to switch to an FHA loan, but why would they? because...
   
2. Option-ARM borrowers may have the principal reset to 95% of the current market value of the house and have payments reduced to 3.5% rates.
3. ARM borrowers may elect to keep the "teaser" rate for 10 years, or use an interest-only loan at 3.5%.

This rate is about 1/2 the payment a full-amortizing 30 year fixed loan would require.

If sellers are paying 50% the payment that buyers are paying for the same house, then it will take approximately 15 years for inflation (at 4-5%) to make up the difference in pricing expectations.

Apparently Countrywide was servicing about 400,000 loans from this period, and they figure they'll pay about $8,750 per loan. ("Fixing" a 40% price decline for the same loans would cost them about $88,000 per loan instead.)

So their numbers sound really low to me, but I actually fill out rebate forms, so what do I know? Maybe they'll make the paperwork hard this time.