Bank of America is taking the first steps toward fulfilling its obligations under the settlement agreement reached several months again among servicers affiliated with five major banks, several federal agencies, and the attorneys general of 49 states. The Bank announced today that it has sent the first of more than 200,000 letters to customers who may be eligible for forgiveness of a portion of their mortgage principal balance.
A statement from the bank said that under the terms of the settlement, it will "strive to provide an affordable payment to qualified under-water homeowners by first reducing the principal balance to as low as 100 percent of the current property value, then lowering the interest rate and forbearing additional principal, as necessary, to reach the target payment." Any modification must survive a net present value calculation to determine if the cost incurred by the mortgage investor through the modification is less than the expected loss to the investor if it goes to foreclosure instead. The bank estimates average monthly savings of 30 percent on mortgage payments of customers who qualify for this program.
To be eligible for this program, a homeowner with a loan owned and serviced by the Bank or for which it has delegated authority to do modifications must meet certain criteria, including:
- Having a mortgage balance greater than the current value of the property;
- Being at least 60 days delinquent on mortgage payments as of January 31, 2012.
- Obligated to payments of principal, interest, taxes and insures equaling more than 25 percent of gross household income.
The Bank began making principal reduction offers to homeowners who were already in the modification review process in March and has made about 5,000 trial offers to date. Homeowners are required to make at least three timely payments before the modification can become permanent. The wave of mailings announced today is aimed at a broader base of customers who may be eligible for this principal reduction program.
"Building on home retention and payment assistance programs already in place, we are meeting our obligation to deliver this additional relief to our customers following the completion of the recent global mortgage settlement," said Ron Sturzenegger, Legacy Asset Servicing executive. "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."
