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Bank of America planning more principal reductions to qualified homeowners

Bank of America will offer more borrowers reductions in their mortgage-loan balances in the latest efforts to prevent foreclosures

BofA’s plan for more principal write-downs enhances an agreement Bank of America reached 18 months ago with state attorneys general to settle claims they made over certain high-risk loans made by Countrywide Financial before Bank of America acquired that lender in mid-2008.

Principal reductions up to 30-percent on ARMS and 2-yr fixed loans

Reductions of as much as 30% in loan principal will be offered to struggling borrowers who have subprime or so-called option adjustable-rate mortgages, known as option ARMs. Also included will be certain loans that have a fixed interest rate for the first two years before starting to adjust annually.

Under the Bank of America plan, the maximum decrease in principal will be 30%, and borrowers will have to “earn” the lower balances in stages over five years by keeping up on their new, lowered payments.
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Video Q&A Segment Discusses Latest Trends In Principal Reductions

Loan modification expert, Mike Rockwood, and author of the loan modification workbook I recommend, discusses principal reduction trends and programs offered by Bank of America and Wells Fargo in this video Q&A segment.

If you are not in the target group the banks are working with on principal reductions, you may consider using a hammer to motivate your loan servicer to negotiate with you, namely, a mortgage or forensic audit. This audit will document federal and state violations committed by the lender on your loan.

There are independent forensic auditors you can hire or a foreclosure defense attorney will likely have someone in their Rolodex.

The program is limited to Bank of America customers who are at least 60 days overdue on payments, who can demonstrate that a financial hardship prevents them from making payments at the current level, and whose loan balance is at least 120% of the estimated home value. The bank estimated that 45,000 customers will qualify for the relief.

What’s motivating BofA and other banks?

Banks are finding that many deeply underwater borrowers aren’t willing to keep making even reduced payments because they believe they have little hope of ever having equity in their homes and would be better off renting and perhaps buying a cheaper home later.

By cutting principal, Bank of America said, it will reduce the risk that borrowers will default again later. “We believe this could become an industry model for principal forgiveness,” the bank said.

The program also addresses the woes of option ARM borrowers whose loan balances have increased over the years because they made minimal payments that deferred part of their interest due. Some of these borrowers will qualify for a reduction in their principal to as low as 95% of the home value.

How market value will be determined

To determine the market value of a home under the program, Bank of America plans to use computer models that estimate those values or, in some cases, opinions from real-estate brokers. Those estimated values will then be adjusted annually using metropolitan-area price indexes, Bank of America officials said.

Before completing and sending in a loan modification package, you may want to obtain some coaching to combat the stall tactics banks/servicers are using to cut to the front of the line of other applications and get approved faster

Click here to get proven help with your home loan modification

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Related posts:

  1. Lenders may be forced to use principal reductions as foreclosures rise
  2. Bank of America faces pressure from faith-based groups over loan modifications
  3. FDIC Chairman Sheila Bair wants to force banks to reduce principal for homeowners on brink of foreclosure
  4. Bank of America to clarify HAMP terms for customers
  5. Florida homeowners have filed hundreds of loan modification complaints against Bank of America

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2 Responses to Bank of America planning more principal reductions to qualified homeowners

  1. John Wright on 15/04/2010 at 23:34

    Wright vs. Bank of America Lawsuit at:

    When I filed my lawsuit against Bank of America, myself and United Law Group thought of the many others out there in the same situation. It was then that we decided to educate the public on what these piggy banks are doing, as well as unite us all together as one voice. Please help me turn this David vs. Goliath modification process, into a Goliath vs. Goliath.

    Please stand with me and United Law Group and send an email to Bank of America that states that we will no longer tolerate their potentially illegal, fraudulent, irregular and abusive business methods.

    Divided we might have fell America, but united we must stand!

    Please send your email directly to Bank of America and include the following:

    1. Your name
    2. Your complaint concerning your experience with Bank of America.
    3. Please end your email “I support John Wright vs. BofA Lawsuit!”
    4. Please send a copy of your email to [email protected]
    5. Please send your email to both BofA link below and the CEO email

    BofA Linked Email:

    CEO Brian Moynihan:
    [email protected]

  2. jose corona on 12/12/2010 at 16:55

    still in reveiw for 2 years and even hired an attorney!in upside down home interest only loan, bought in 2005 for double what we paid, and we just cant take anymore, most my friends were all modified, why is this taking so long, i believe its because they are stalling us to continue to collect what they can get, in mean time we are suffering

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