Successful Bank of America Loan Modification with Principal Reduction

There was a deadline of November 19th and I went ahead and decided to make my first new payment of $1953.86.It actually felt good to pay the mortgage again because I really hated the idea of not paying and having to move.The new terms of the loan werespelled out in this letter.The terms were the following:

A)  Reduce principal from 505k to 378k and fix the rate at 5.5%
B)  This would give me a new payment of $1956.86 that was amortized over 40 years.
C)  The original loan expires in March of 2035 and that did not change.So there will be a balloon payment of the remaining

principal at that time but its only $236k. That is easily paid down to nothing by just adding a couple hundred dollars each month or I’ll just sell the house way before then.

Well the final papers showed up a few days ago and have been notarized and sent back.It was a two page amendment that was clear and to the point.No games, no tough legal talk, nothing but a really good deal.I had several people review as well as my attorney friend. They were all surprised by how clearly spelled out everything was.

Everything is good again with the house.Still have some other financial matters to deal with as well as my second mortgage of 55k.The bottom line is this….I am not sure how well the government programs are working for people; this deal came straight from the bank because it was the best deal for them too.It would be a loss to them for foreclosure and this minimizes there loss and mine.

By the time they had sent the letter I was 5 payments behind. Interest was at about 4.25% but it could go up to 9.95% if the MTA index goes up. The highest that rate ever got was about 8.75%.

This was a principal reduction. Its tricky to understand but the final papers say it as such. I could sell my home or pay this loan at anytime and the pay off would only be 378k. The balloon payment in 25 years is the remaining balance off the paid down 378k. Its hard to understand and I was confused at first too.

The final paperwork says it all. Remember it has to say it in writing to believe it. I am very shocked to see all the different opinions on this balloon payment. I have read the final paper work you guys have not. Trust me its a great deal and I am happy I took it. I mainly wanted to share this with other people so they know that the banks are fully capable of doing a true principal forgiveness at this point in the game. But remember they are only going to do this along with a loan modification if its going to work better for them then forclosure. This is just common sense to be, after all the banks are still just in the business of loaning money and making money, not owning real estate.

New Bank of America Principal Reduction plan

THE PLAN: Beginning in May, some Bank of America customers’ total mortgage balance could be reduced up to 30 percent. ELIGIBILIY: Homeowners must have missed at least two months of mortgage.

The lender will first offer an interest-free forbearance of principal that the homeowner can turn into forgiven principal annually over five years, provided they stay current on their payments.

Ineligible are 30-year fixed-rate loans.The forgiveness would be offered in two stages for the riskiest loans, including subprime loans and loans that offered borrowers multiple options for how much to pay each month.

The forgiveness can let a homeowner bring the loan value back down to 100 percent of the home’s value over five years.
Barbara Desoer, president of Bank of America Home Loans, said that while “earned principal forgiveness helps homeowners, it also recognizes and addresses the interests of mortgage investors by ensuring that forgiveness is tied to the homeowner’s performance.”She added that this process lowers “the probability of a future default under the modified terms” and adjusts “the total amount to be forgiven in light of any gains in property values that might occur in an economic recovery

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