As the housing crisis in America is still unfolding, where this year alone over 200,000 homes have been foreclosed, Bank of America has started offering homeowners help by forgiving a portion of the principal balance on their mortgages by an average of $150,000 each.
Bank of America Mortgage Reductions – Hope for 200,000 Borrowers
According to CBS News, Bank of America is sending letters to the first 200,000 borrowers who may qualify for assistance. In a press release on Monday, Bank of America stated that the reduction for those who qualify could amount to monthly savings as much as 35 percent on mortgage payments. According to Yahoo News, the principal reduction offers from Bank of America Home Loans come as a result of the $25 billion settlement agreement earlier this year, where 49 state attorneys general as well as federal authorities investigated allegations of abuse over the handling of foreclosures by the banking system.
Bank of America Mortgage Reductions – Criteria to Qualify
In a comment to the press, a legacy asset servicing executive, Ron Sturzenegger, said
“To the extent principal reduction and other modification tools help us turn mortgages headed for possible foreclosure into long-term performing loans, it will be positive for homeowners, mortgage investors and communities.”
While the news will help many struggling families, to be eligible for the principal reductions, homeowners will have to meet certain criteria. The criteria that must be met to qualify for the principal reductions include: having a loan owned or serviced by Bank of America; owing more on the mortgage than their property is worth; and being at least 60 days behind on payments as of the end of January.
Bank of America Mortgage Reductions – Hundreds of Millions in Forgiven Principal
In their statement to the press, Bank of America mentioned that it had started making similar offers in the beginning of March to a smaller group of homeowners who were already in the process of seeking mortgage modification. In their estimation, the bank stated that the earlier wave of trial reduction that was offered to nearly 5,000 people could amount to more than $700 million in forgiven principal. However, in order to make the reductions permanent, homeowners have to make at least three timely payments. In addition, in order to help borrowers reach their target payment, Bank of America said that it will initially reduce the principal balance for eligible borrowers to as low as 100 percent of a property’s current value and will also lower the interest rate and forebear additional principal.
Bank of America Mortgage Reductions: Bank of America Turning Over a New Leaf?