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Bank of America principal reductions to average over $100,000

Bank of America has cut a side deal after the $25B mortgage settlement to offer massive principal reductions to homeowners that are underwater, a major move that the other large servicers will not likely be allowed to offer.

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Cutting borrowers’ balances

Last month, after months of being stalled, Bank of America and the four other largest American mortgage servicers settled for $25 billion in a civil suit between 49 states’ attorneys general and the federal government. According to the Wall Street Journal, Bank of America has struck a side deal to allow the bank to reduce penalties in exchange for larger cuts to borrowers’ mortgage balances.

Various agencies have been pushing for principal reductions as a means of propping up housing and reducing the high foreclosure rates. Bank of America will reportedly make bigger cuts than other banks to avoid up to $850 million in penalties, giving 200,000 homeowners the option to reduce the balances owed on their mortgages.

The Journal notes the side deal is unique to Bank of America, citing a senior administration official, noting that many of the reductions will be made on loans that were originated by Countrywide Financial and packaged into securities. Bank of America acquired Countrywide in 2008, along with their good and bad assets. The deal is unique because investors in the mortgage-backed securities may feel an impact as a result of Bank of America’s new side deal.

Massive principal reductions

According to Reuters, qualified borrowers are expected to receive principal reductions averaging over $100,000, citing a Bank of America spokesperson. Those receiving the reductions will see their mortgage balance cut to their home’s current market value, as opposed to the other banks in the settlement that cannot cut principal by over 120 percent of the home’s value.

Bank of America will pay nearly $11 billion of the $25 billion mortgage settlement, having the most liability after the real estate crash, particularly through their Countrywide acquisition.

Bank of America, Ally Financial, JPMorgan Chase, Citigroup and Wells Fargo have settled civilly, but all remain vulnerable to criminal charges which are being pursued by a task force recently formed by the Obama administration.

Tara Steele is the News Director at The American Genius, covering entrepreneur, real estate, technology news and everything in between. If you'd like to reach Tara with a question, comment, press release or hot news tip, simply click the link below.

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41 Comments

41 Comments

  1. Doug

    March 11, 2012 at 1:53 pm

    I fall under this category however, I am current on my mortgage, do I have a chance to qualify?

    • Len

      March 14, 2012 at 9:49 am

      Yes, you qualify if you have been current on your payments over the last twelve months. Call BOA and ensure they hold your mortgage and it is not federally backed.

      • Doug

        March 16, 2012 at 2:22 pm

        I called BOFA and they did tell me I was qualified since the investment company who held our loan was one that was on their “list” (not sure what list they are referring to) for the reduction program. I was told to wait 60 days or so for further information.

        • MikeNY

          March 16, 2012 at 11:57 pm

          Doug, I had my loan through countrywide ended up with bank of America, I have also been current. What kind of information did you provide when you called and what questions did thy ask?

          Thx

          • Doug

            March 18, 2012 at 12:38 am

            They asked what my account number was and then I was put on hold for a few minutes. Afterwards, they told me the private investor was part of the principal reduction program. Since the case is still in courts, I have to wait 60 days.

          • MikeNY

            March 19, 2012 at 7:17 pm

            Hey Doug “Update”

            Called and the Service rep seemed to be reading a script, however told me that you would have to be 60 DAYS or more late as off Jan 31st to qualify for Reduction. whats your take on this

  2. bficker

    March 11, 2012 at 2:11 pm

    Any idea how we can get our clients help with this? I know MANY of my clients would love to stay in the home, but traditional loan mods don’t make sense because of the value.

  3. NICOLAS GONCHAR

    March 11, 2012 at 10:59 pm

    Bof A has wiggled out of every attempt we have tried to get a loan modification. Kindly detail what qualifications we need to get this reduction. When it comes to generalities, we always lose. Thank you.

  4. Stan Read

    March 12, 2012 at 11:53 am

    Question: what if someone had loans with B of A that were sold to other servicers?? Are they off the hook now?

  5. Verne Lindsay

    March 12, 2012 at 1:32 pm

    I just called Bank of America to apply for the Principle Reduction Settlement and was told that I am not eligible for the Settlement because my loan is serviced through investors (Government) Fannie Mae they are not included under the Justice Department Lawsuit! I am easily under water $50,000.00 to $75,000.00 in the value of my home that I purchase in 2006 at the height of the market. I need help, can someone that is legitimate assist me in reducing my principle balance?
    Thanks

    • sandy

      March 12, 2012 at 6:14 pm

      I also am in the same boat. We are always told we don’t qualify and we owe twice the market value of our home. Is there anyone out there willing to legally help? We are not behind on payments, but struggling for some relief!!

  6. Greg Cook

    March 13, 2012 at 5:52 pm

    Thanks Tara, another article I read said that loans sold to Fannie, Freddie and government insured aren’t eligible for this program.
    As a former Countrywide Manager and loan holder, I suspect the loans will primarily be those sold to Countrywide Bank which were pay option arms.

  7. Kevin Burke

    March 14, 2012 at 10:05 pm

    Will BOA send out letters to their mortgagors, or do I need to contact BOA to request the principal reduction? Secondly, how will current value of the home be determined? If the bank determines this value, and the homeowner feels the appraisal is greatly overestimated, will the homeowner have any appeal rights?

  8. Joanne Kuhn

    March 18, 2012 at 6:36 pm

    In the two years since we purchased our home, our mortgage has changed hands three times. Two of these companies are Countrywide and Bank of America, N.A. who presently receive our payments. With each change our payments have increased, then in the interim, the property values took a dive! We are now way upside down. The B. of A. said that we do not qualify for the Mortgage Principle reduction because the investors do not want us included in this program. This not right. Everything I have read says that this is a valid program specifically targeted to help those who are under water. I was asked my race and ethnicity because they said that HUD was required to include this on my application. I hope that my race would have nothing to do with this denial. Just who are these investors who are directing B.of A. not to follow the stated guidelines?? What can we do now? Does anyone know? Let me hear from somebody. Thanks HUD said we had the option to foreclose or sell our property through a bank sponsored sale. This is not an option for us. thanks again. HELP SOMEBODY!

  9. Joanne Kuhn

    March 18, 2012 at 6:49 pm

    O.K. ths my moderation.We meet the guidelines for the published Bank of America Principle Reduction/ But we were denied because the “Investors” did not want to include us. Again – WHATS UP WITH THIS? What can we do? . We are current with our mortgage as always. What can we do to atop this outrageous behavior by B. of A. This ACTON SOUNDS ILLEGAL. HELP SOMEBODY!

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Is the real estate industry endorsing Carson’s nomination to HUD?

(BUSINESS NEWS) Ben Carson’s initial appointment to HUD was controversial given his lack of experience in housing, but what is the pulse now?

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NAR strongly backs Dr. Carson’s nomination

When President-Elect Donald Trump put forth Dr. Ben Carson’s name as the nominee for Secretary of Housing and Urban Development, NAR President William E. Brown said, “While we’ve made great strides in recent years, far more can be done to put the dream of homeownership in reach for more Americans.”

At the time of nomination, the National Association of Realtors (the largest trade organization in the nation) offered a positive tone regarding Dr. Carson and said the industry looks forward to working with him. But does that hold true today?

The confirmation hearings yesterday were far less controversial than one would expect, especially in light of how many initially reacted to his nomination. Given his lack of experience in housing, questions seemed to often center around protecting the LGBT community and veterans, both of which he pledged to support.

In fact, Dr. Carson said the Fair Housing Act is “one of the best pieces of legislation we’ve ever had in this country,” promising to issue a “world-class plan” for housing upon his confirmation…

>>>>>Click to continue reading…<<<<<

#CarsonHUD

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Job openings hit 14-year high, signaling economic improvement

The volume of job openings is improving, but not across all industries. The overall economy is improving, but not evenly across all career paths.

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Job openings hit a high point

To understand the overall business climate, the U.S. Labor Department studies employment, today releasing data specific to job vacancies. According to the department’s Job Openings and Labor Turnover Survey (JOLT) for April, job openings rose to 5.38 million, the highest seen since December 2000, and a significant jump from March’s 5.11 million vacancies. Although a lagging indicator, it shows strength in the labor market.

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The Labor Department reports that the number of hires in April fell to 5 million, which indicates a weak point in the strong report, and although the volume remains near recent highs, this indicates a talent gap and highlights the number of people who have left the labor market and given up on looking for a job.

Good news, bad news, depending on your profession

That said, another recent Department report notes that employers added 221,000 jobs in April and 280,000 in May, but the additions are not evenly spread across industries. Construction jobs rose in April, but dipped in professional and business services, hospitality, trade, and transportation utilities. In other words, white collar jobs are down, blue collar jobs are up, which is good or bad news depending on your profession.

Additionally, the volume of people quitting their jobs was 2.7 million in April compared to the seven-year high of 2.8 million in March. Economists follow this number as a metric for gauging employee confidence in finding their next job.

What’s next

If you’re in the market for a job, there are an increasing number of openings, so your chance of getting hired is improving, but there is a caveat – not all industries are enjoying improvement.

If you’re hiring talent, you’ll still get endless resumes, but there appears to be a growing talent gap for non-labor jobs, so you’re not alone in struggling to find the right candidate.

Economists suspect the jobs market will continue to improve as a whole, but this data does not pertain to every industry.

#JobOpenings

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Gas prices are down, so are gas taxes about to go up?

Do low gas prices mean higher gas taxes are on the way? Budgeting for 2015 just got a bit more complicated, if some politicians have their way.

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Gas taxes and your bottom line

Many industries rely heavily on time in their vehicle, not just truck drivers and delivery trucks. Sales professionals hop in their vehicles throughout the day, as do many other types of professionals (service providers like plumbers, and so forth). For that reason, gas prices and taxes are a relevant line item that must be budgeted for 2015, but with politicians making the rounds to push for higher gas taxes, budgeting becomes more complicated.

Gas prices are down roughly 50 cents per gallon compared to a year ago, which some analysts say have contributed to more money in consumers’ pockets. Some believe that this will improve holiday sales, but others believe the timing is just right to increase federal taxes on gas. The current tax on gas is 18.40 cents per gallon, and on diesel are 24.40 cents per gallon.

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Supporters and opponents are polar opposites

Supporters argue as follows: gas prices are low, so it won’t hurt to increase federal gas taxes, in fact, those funds must go toward improving our infrastructure, which in the long run, saves Americans money because smoother roads mean better gas mileage and less congestion.

Gas taxes have long been a polarizing concept, and despite lowered gas prices, the controversial nature of the taxes have not diminished.

While some are pushing for complete abolition of federal gas taxes, others, like former Pennsylvania Governor, Ed Rendell (D) tell CNBC, “Say that cost the average driver $130 a year. They would get a return on that investment” in safer roads and increased quality of life, he added.

The Washington Post‘s Chris Mooney points out that federal gas taxes have been “stuck” at 18 cents for over 20 years, last raised when gas was barely a dollar a gallon and that the tax must increase not only to improve the infrastructure, but to “green” our behavior, and help our nation find tax reform compromise.

Is a gas tax politically plausible?

Mooney writes, “So, this is not an argument that a gas tax raise is politically plausible — any more than a economically efficient tax on carbon would be. It’s merely a suggestion that — ignoring politics — it might be a pretty good idea.”

Rendell noted, “The World Economic Forum, 10 years ago, rated us the best infrastructure in the world,” adding that we “need to do something for our infrastructure, not in a one or two year period, but over a decade.”

Others would note that this rating has not crumbled in just a few years, that despite many bridges and roads in need of repair, our infrastructure is still superior to even the most civilized nations.

Regardless of the reasons, most believe that Congress won’t touch this issue with a ten-foot pole, especially leading up to another Presidential campaign season starting next year.

“I think it’s too toxic and continues to be too toxic,” Steve LaTourette (the former Republican congressman best known for his close friendship with his fellow Ohioan, Speaker John Boehner) tells The Atlantic. “I see no political will to get this done.”

Whether the time is fortuitous or not, and regardless of the positive side effects, many point to a fear of voters’ retaliation against any politician siding with a gas hike, so this matter going any further than the proposal stage is unlikely.

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