Bank of America, as part of a settlement it and other large banks made with state and federal regulators earlier this year, is offering about 200,000 homeowners significant mortgage debt relief through principal forgiveness on their home loans.
The average amount of principal forgiveness being offered is about $150,000, said Ron Sturzenegger, an executive at Bank of America. âAnd when you take their new principal amount times their new interest rate, it’s about a 35 percent savings from what they were paying before,â Sturzenegger said (âBank Of America Offers To Cut Mortgage Principal,â NPR, May 8, 2012).
Only a small group of Bank of Americaâs borrowers qualified for the one-time offers, which are scheduled to arrive in the mail this week:
- They must owe more than their home is worth
- They must be at least two months delinquent on their mortgage payments as of the end of January
- Eligible mortgages must be held and serviced by Bank of America or by investors who authorized the bank to change the terms of its loans
However, Sturzenegger said heâs concerned that some homeowners, already wary of calls and mailings concerning their home loans, will ignore Bank of Americaâs one-time offer at principal forgiveness.
Many homeowners with Bank of America and other lenders have participated in loan modification programs, only to be kicked out in worse shape than they were before. And other homeowners may be wary of scammers targeting underwater homeowners for bogus debt relief services.
âAnd so [Bank of Americaâs homeowners] have become defensive and they have not responded,â Sturzenegger said. “We would like for them to know this one is different. I don’t want to say this is their best last chance, but I think it’s the best chance they’ve had so far.â
Bank of America said that homeowners who donât qualify for the principal forgiveness offer may still apply for what the lender calls âdignified alternatives,â which are programs that allow homeowners to modify their loans without principal forgiveness or lease back their homes from the bank.
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