Posts Tagged: ‘Principal Reduction’

Bank of America Offers Principal Reductions to Underwater Homeowners

June 29, 2012 Posted by kingcade

Bank of America recently announced that homeowners underwater on their mortgages will soon be receiving relief in the mail. The first wave of letters will be mailed out by the third quarter of this year to some 200,000 homeowners who may qualify for a principal reduction on their mortgages. Homeowners who qualify will save an average of 30% monthly on their mortgage or a total of about $150,000.

The homeowners who qualify must meet the following criteria:

1. They must be underwater on their mortgage.
2. They must be 60 days delinquent as of January 31, 2012.
3. Their monthly payment combined with insurance and other fees must account for 25% of their gross monthly income.
4. Their loan must be held by Bank of America, not a federally backed lender.

In March, Bank of America started a trial program for principal modifications for about 5,000 underwater homeowners. The bank disclosed that of these 5,000 homeowners, the combined savings reached approximately $700 million in just a few short months. Bank of America views this move as a way to hold up to their end of the settlement reached earlier in the year with the government as a result of the robo-signing scandal. Although the principal reductions are expected to relieve homeowners of much of their debt, it might also end up diminishing their credit scores. FICO spokesman, Anthony Sprauve said that as of now it is ‘undetermined how the reductions will be reported.’

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