Get Help With Your Underwater Bank of America Mortgage
In February 2012, the major lenders in the United States struck a deal with the government to avoid prosecution for improper processing of foreclosures. In order to reduce its share of penalties, Bank of America has revealed recently that it is willing to forgive the principal of many mortgages so that the borrowers will no longer be underwater. Some borrowers may qualify for reductions of $100,000 or more. Here are the details of the program and how you can find out if you qualify. (See also: 6 Options If You're Underwater on Your Mortgage)
This new principal reduction program is a part of the National Homeownership Retention Program rolled out by Bank of America since Obama's Home Affordable Modification Program. The borrowers that will receive help must meet these qualifications:
- The borrower must be at least 60 days late on payments as of January 31st, 2012. So people who have been paying their loans on time do not qualify unless they can demonstrate that they will default soon due to a rate reset on an ARM. Borrowers who are current also need to submit documentation showing financial hardship.
- The amount owed must be more than 120% of the current value of the house.
- The loan cannot be a Fannie Mae or Freddie Mac Loan. Only loans owned by Bank of America or private investors are eligible.
- The property must be owner-occupied.
The maximum amount Bank of America will forgive is 30% of the remaining principal or the difference between the current value and the loan, whichever is smaller. For example, if a house is currently worth $150,000 and the loan is $180,000 then they will reduce the loan to $150,000. If a house is worth $150,000, but the loan is $250,000, then they will only reduce the loan to $175,000, since that is a 30% reduction on the loan. So a borrower in the second situation will still be underwater, but it would still be a significant improvement to pay interest on 70% of the previous principal.
The principal forgiveness is also spread out over three or five years, depending on the individual case. From the examples given by the bank's site, it looks like they will take future appreciation of the home into consideration and reduce less of the principal if the house's value goes up. It's unclear what would happen if the house's value goes down.
The program ends on December 31st, 2012, so borrowers that possibly qualify should go to Bank of America's site right away and see if they are eligible. The website allows you to type in your mortgage account number to see your options. You can also click the FAQ tab on Bank of America's page for more details. Bank of America says it will help 200,000 people with this program. As part of the National Mortgage Settlement the other major lenders are also supposed to offer more principal reductions, but Bank of America's site is the only one with clear guidelines so far.
Are you a Bank of America customer who will benefit from this? Do you think this program will be more successful than previous attempts to curb foreclosure?