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.
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
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.
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.
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?
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!!
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.
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?
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!
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!