There are signals the nation's housing industry may be entering another downturn following a brief rebound.
In addition to weak new home and existing February sales another problem is lingering.
Several million underwater mortgages, where the homeowner's loan is valued more than their house.
On Wednesday, Bank of America, the nation's largest mortgage lender, announced it will launch a program to permanently modify severely underperforming subprime and balloon payment loans.
Mortgages where owners owe more on their home than what it is worth.
B of A alone has more than one million defaulted loans. This program would help an estimated 45,000 homeowners.
"This is our group that is actually most troubled. It's our pay option customers, our sub-prime customers, and our 2-1 hybrids," said Jack Schakett of Bank of America.
B of A would forgive up to 30 percent of the principal amount on a loan ahead of an interest rate reduction
Under the plan homeowners must owe more than 120 percent of the home's value, be 60 days or more behind in mortgage payments.
B of A developed the program with Massachusetts courts after homeowners filed federal lawsuits last month.
Homeowners claimed B of A and other major banks were resisting or not working quickly enough under the federal government's home affordable modification program to reduce mortgage payments.
B of A is now expanding the program to 44 other states, And other banks could follow.
"I think we'll see the bank of America move give some cover to the federal government to encourage banks to do more widespread principal write downs,” said mortgage industry consultant Howard Glaser.
Nationwide, underwater mortgages are flooding the housing market with foreclosures.
Currently there are 7.5 million loans where owners are delinquent or in the foreclosure process.
A government watchdog groups estimates the average homeowner could owe up to two and a half times more than the home's value.
In recent months, many homeowners have opted to walk away.
But mortgage experts say that move also hurts the bank, neighborhood property values and stays with the homeowner.
"The consequences are dire. You really, in effect, when you walk away, have locked in your loss," said John Courson of the Mortgage Banker’s Association.
Losses that are adding up to a whole new level of pain for homeowners and the housing market.
