BofA New Home Mortgage Principal Reductions Program

BofA New Home Mortgage Principal Reductions Program

Q: Does Bank of America do Principal Reduction on Loan Modification?I am applying for loan modification with Bank of America. Currently they want to just lower my interest rate from 6.3% to 3.1% for a period of 5 years. What I really want is for them to lower my principal to whatever the house is worth right now (420k from 650k). Is this possible?

A:That’s not going to happen. Why should Bank of America reduce the principal on your loan because your property value decreased ? That’s not their fault.The idea of a ‘loan modification’ is not to reduce your principal, but to make it possible for you to make lower payments so that you CAN eventually retire the full debt owed to the lender.

The basics of the program detail that you can reduce the balance of your mortgage to 100% the value of your home. There is a section of the principal balance that will be interest free before the loan reduction. If you do not miss any payments over the course of 5 years then you can have up to 30% of the principal forgiven.

There are other requirements for being able to partake in this mortgage principal forgiveness loan as you must also qualify for the mortgage loan modification program put in place by President Obama. Currently the bank believes that 45,000 of their mortgage customers are eligible to partake in this new program. Those that meet the preliminary guidelines will receive notification from the bank.

This new program is to help those that would normally simply write off their unaffordable mortgages and Bank of America is one of the first to respond to the need to save homeowners during this difficult and high unemployment time. It is the hope that many other banks will follow suit and Bank of America has decided to pave the way.

In combination with e mortgage modification program from the treasury depart it should be much easier to pay off the new principal as you are getting lower interest rates so more of your monthly payment is going towards paying off the principal. Other steps the bank has started to take include considering payment reductions on adjustable rate mortgages as well as extending the National Homeowner Retention Plan until the end of 2012.

BofA New Home Mortgage Principal Reductions Program Relate post:

Success With Aurora Loan Modification
Wachovia Loan Modification Success

Chase Principal Forgiveness Program
Wells Fargo’s Principal Reduction Plan and Obama’s Making Home Affordable
Wells Fargo New Home Loan Modification Program