Bank of America Begins Loan Modification Program

Photo of Bank of America ATM Machine by Brian ...

Photo of Bank of America ATM Machine by Brian Katt, Framingham Rest Stop, Massachusetts. (Photo credit: Wikipedia)

According to an Associated Press release, Bank of America, in response to it part in a multi-billion dollar lawsuit settlement over foreclosure abuses, is sending out thousands of letters to offer homeowners a new program for home loan modification.

As part of the deal, Bank of America will be offering to reduce some of the luckier homeowner’s principal owed by as much as $100,000. The company estimates that more than 200,000 of its customers could potentially be in line for reduction of their principal balance on the mortgage at this time.

Bank of America began compliance with its part of the settlement in March, focusing on homeowners who already had a loan modification bid under review. The bank mailed over 5,000 modification offers, representing more than $700 million in forgiven principal balances.

Bank of America received the largest penalty of the five banks who made the multiple state settlement. Bank of America’s part was $11.8 billion dollars of a total of $25 billion in penalties.

The settlement is earmarked for an estimated 1 million households that owe more on their mortgages than their houses are worth. That statistic compares to 11 million citizens in the United States whose houses are “underwater” on their mortgages.

Bank of America, along with other large mortgage lenders, stopped processing foreclosures in 2010 when they were first made aware of wrong doings in “robo signing.” It is estimated that there is still over 5.59 million homes in the foreclosure process and over 1.4 million homes on the foreclosure market as of May 1, 2012.

The home loan modification efforts by Bank of America should be the beginning of the end for their part in the United States mortgage crisis, when home values suddenly dropped forcing many Americans into foreclosure.

Before all of this can mean anything, though, there still has to be an acceptance by the homeowners, that is, if they qualify for the modifications. In order to qualify, a borrower has to owe more on the mortgage than the house is currently worth, and the borrower’s loan must be owned by Bank of America.

To qualify for the modification, the homeowner must answer the letter with full documentation of income to show under the new terms they can still make the new monthly payment. The monthly payment must be more than 25 percent of their gross income.

If you qualify for the new modification, Bank of America will bring your monthly payment down to 25 percent of your gross income. That could mean principal forgiveness in excess of $100,000 for some borrowers.

Potentially, Bank of America could pay out more than there settlement amount of $11.8 billion to customers, but they are figuring some customers either do not want their house back or have already abandoned the house.

Foreclosures is one of the leading causes for bankruptcy filings in the United States. If you are currently being foreclosed on, and you do not qualify for a loan modification, allow us to contact a local bankruptcy attorney in your area.

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