Home loan modification offer soon from Bank of America
WASHINGTON - Bank of America will soon offer around 200,000 housing mortgage customers a chance to seek reduction in the principal amount.
The offer to eligible homeowners could knock off as much as $150,000 from the balance of their mortgages and lead to monthly savings of up to 35 per cent on repayments, the Bank of America (BoA) in a statement Monday evening.
The move is part of the $25 billion settlement reached this year between federal and state agencies and the nation's five largest mortgage servicers over fraudulent foreclosure document processing (so-called "robo-signing").
In a deal with state attorneys general and the U.S. Department of Justice, the BoA has committed $11 billion to mortgage principal reduction, but executives say they will go beyond that if enough borrowers respond to their offer.
Five thousand borrowers have already received a collective $700 million in principal reduction through a pilot program for those already in a modification negotiation. The 200,000 borrowers being targeted now may have already exhausted modification options or may have yet to contact the lender.
"If people get these things and toss them, they won't be eligible," says Ron Sturzenegger, the Bank of America executive charged with providing solutions to borrowers in need of mortgage assistance.
"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," said Sturzenegger.
The bank said it planned to contact the eligible homeowners by sending a majority of them letters by the third quarter of this year.
To be eligible for the principal reductions, however, homeowners will have to meet certain criteria, including: having a loan owned or serviced by BoA; 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.
In the statement, the bank said it had started making such offers in March to a narrower group of homeowners those who were already in the process of seeking mortgage modification.
Homeowners have to make at least three timely payments for the reductions to become permanent, the bank statement said.
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