Tens of thousands of the most distressed borrowers of Bank of America could be evicted and lose their homes more quickly as a result of a proposed settlement between the bank, which is the country's largest mortgage servicer, and investors in its troubled mortgage securities, according to an article in today's edition of The New York Times by Nelson D. Schwartz.

While powerful investors stand to benefit from the $8.5 billion settlement over the bank's bundling of shoddy mortgages as securities, the article said, "the fallout for the nearly 275,000 borrowers who took out those loans depends greatly on how deep they are in the foreclosure process and whether they earn enough money to dig themselves out. While no exact income qualification has been set as part of the agreement, which was announced last month, many servicers use a formula in which borrowers can qualify for a modification as long as the new monthly payment does not exceed 31 percent of their monthly gross income. For borrowers who are unemployed or lack the income to cover even reduced mortgage payments, foreclosure and eviction could be much more immediate."

The article said that "for struggling borrowers in better financial shape, the outcome could be more positive: the deal would include incentives for mortgage servicers to help homeowners who have fallen behind on their payments and whose homes are worth less than they borrowed."

"'The goal is to reinstate as many borrowers in a modification that performs well,' said Tony Meola, a servicing executive with Bank of America. 'It also is likely to lead to faster resolution in those unfortunate situations where foreclosure is inevitable. While not a desirable outcome, the recovery of the housing markets depends on moving through the foreclosure process as quickly and fairly as possible,'" the article continued.

"For some of the homeowners now facing foreclosure who took out loans with Countrywide, the subprime specialist bought by Bank of America in 2008, the deal could bring a few quick improvements. Under the terms of the agreement, Bank of America must now start transferring these borrowers to 10 smaller outside servicers, even without the deal being approved in court, which is not expected before November. The architects of the settlement say these subservicers will be far more efficient than Bank of America's giant payment processing operation," the article said.

Under the new proposal, the article said, "subservicers will have to provide an answer to homeowner modification requests within 60 days of receiving paperwork, and will get up to 1.5 percent of the unpaid principal balance as an incentive fee for each successful permanent modification."