Monday, May 28, 2012

Borrowers of Bank of America May Have Something to Smile About

Customers of Bank of America may have something to smile about finally as 200,000 delinquent Borrowers to Receive Principal Write-Down Offers. Bank of America is wasting little time in getting one of the most popular terms of its recent settlement with the federal government underway. Bank of America sent out more than 200,000 letters this week to delinquent borrowers who where “thought to be eligible for principal-reducing modifications.” The requirements are simply that the homeowner owe more on the mortgage than the property is worth and have been at least 60 days behind on payments at the end of January 2012. If monthly housing costs turn out to be more than a quarter of the homeowner’s gross household income, then they could qualify for savings of 30 percent according to Bank of America estimates. The lender has been working since March on trial modifications that hold the potential to forgive more than $700 million in mortgage debt. However, the trial modifications require three “timely trial payments” before a modification is eligible to become permanent. This has become customary in the industry anyway, so it is not much of a hurdle. There is one major caveat to this initiative, however: if your loan is serviced by Bank of America but held by Fannie Mae, Freddie Mac, the Federal Housing Administration (FHA), or the Veterans Administration (VA), then it is not eligible for a write-down under the terms of the foreclosure fraud settlement. That represents a lot of loans, but this is still good news for many borrowers. I have several clients in the program, so we will see what happens. Bank of America committed to forgiving $11 billion in total mortgage debt under that settlement, but if all homeowners who receive these letters – and others like them in Q3 2012 – were to receive permanent loan modifications, the actual number might be closer to $30 billion. We can all believe it when we see it!! Paddy Deighan J.D. Ph.D

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