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Blog: Bank of America Starts Mortgage Reduction Effort

BofA starts efforts to lower mortgage loans by an average of $150K for more than 200,000 homeowners and help qualifed homeowners receive $2,500-$30K in relocation assistance.

In the May 8 issue of the New York Times, an article reads that Bank of America has started sending letters to thousands of homeowners in the United States, offering to forgive a portion of the principal balance on their mortgages by an average of $150,000 each.

The article explains that the principal reduction offers from Bank of
America Home Loans are the result of a $25 billion settlement agreement earlier
this year with 49 state attorneys general, as well as federal authorities who
had been investigating allegations of abuses in the handling of foreclosures. 

The bank said it planned to contact more than 200,000 homeowners who could
be candidates for the offers, sending letters to a majority of them by the third quarter of this year.

To be eligible for the principal reductions, homeowners will have to meet certain criteria, including: 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.

Ron Sturzenegger, a legacy asset servicing executive, said in the statement that the bank had started making such offers in March to a narrower group of homeowners — those who were already in the process of seeking mortgage modification.

The bank estimated that the earlier wave of trial reduction offers to about 5,000 people could amount to more than $700 million in forgiven principal. But homeowners have to make at least three timely payments for the reductions to become permanent.

On May 15, Bank of America wrote a letter to Realtors with the heading, "Your financially distressed clients want to avoid foreclosure. You want to help them. So do we!"

This is great news.

They went on to write, "that's why Bank of America is excited to announce that for a limited time, we are offering enhanced relocation assistance payments in which qualified homeowners who initiate a short sale without an offer could be eligible to receive $2,500 - $30,000 in relocation assistance and owe no more on their mortgage with the sale of their property."

This post is contributed by a community member. The views expressed in this blog are those of the author and do not necessarily reflect those of Patch Media Corporation. Everyone is welcome to submit a post to Patch. If you'd like to post a blog, go here to get started.

MFriedrich May 23, 2012 at 05:32 PM
Next thing you know we'll be bailing out two bit gamblers in Las Vegas. At least it's not taxpayer funded this time, right? My view is that this program, like many other mortgage market interventions before it since 2007, will fail miserably. The track record in this area is horrid. If you're 60 days + behind on your mortgage, you're pretty much toast anyway. How many cases have we seen of loan mods reverting back to foreclosure 6 months later? Up to $150K principal reduction? Why? And on what principal? How many of these inflated "principal" loan balances in California are the result of shameless HELOC equity withdrawal by the homedebtor? I would wager at least 50%, perhaps much more. It may be nice to see Countrywide's new owner getting a conscience and going all philanthropic here, but this is simply throwing more good money after bad. Here's the deal: Foreclosure exists for a reason. It's actually the SOLUTION to the housing market problems and instability today. It releases homedebtors from obligations they cannot afford and allows them to invest their resources anew. It also allows banks to rid themselves of non-performing loans and write off losses. It also allows prospective new buyers to buy homes and become performing loan payers (and property tax payers). So your credit is bad and you have to rent for a few years after foreclosure? I think you'll survive. Foreclosure is not a "problem" to be avoided at all costs with bailouts, etc.
Yeparoo May 23, 2012 at 06:15 PM
LAO: Using mortgage settlement for budget 'makes sense' - WOW Read more here: http://blogs.sacbee.com/capitolalertlatest/2012/05/lao-using-mortgage-settlement-for-budget-makes-sense.html#storylink=cpy Boo Hoo. So the Federal Government bails out the banks a 2nd time, charges new Freddie loans an extra 1/4 pt, the banks hand over the money to the State Governments? Say it ain't so. Just throw the people in the burbs a few bucks and know one has to know this is a scam. http://blogs.sacbee.com/capitolalertlatest/2012/05/lao-using-mortgage-settlement-for-budget-makes-sense.html
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Joker Joe September 27, 2012 at 02:47 PM
Should of done this instead of bailing the banks out! Must be an election year.
Joker Joe September 27, 2012 at 02:59 PM
Bankruptcy is good for screwing the guy that did you a favor by doing work for you or lending you money or etc. It is a way of saying to that person or company, tough luck dummy!!! The banks will eventually raise fees to pay for the people who were not astute enough do handle a home and we all will pay for it.

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