CALABASAS, Calif. (LoanSafe.org) – Bank of America has begun implementation of an earned principal forgiveness approach to modifying certain loans eligible for its National Homeownership Retention Program (NHRP). The plan is being offered to homeowners who owe considerably more on their loan than the current value of their home, when the loan is being considered for modification through the government’s Home Affordable Modification Program (HAMP).
Among several enhancements to the NHRP announced in late March, the bank unveiled this innovative approach to employing a principal reduction as the first step toward reaching HAMP’s affordable payment target of 31 percent of household income when modifying certain NHRP-eligible mortgages — ahead of lowering the interest rate and extending the term. The reduced principal balance will be a non-interest bearing forbearance amount, and the homeowner may earn forgiveness of the forborne amount by remaining in good standing on payments.
The NHRP enhancement was implemented on schedule in mid-May with the mailing of the first letters notifying customers who may qualify for the new program. Customers are required to submit required documentation of financial information for consideration in determining eligibility and underwriting the modification plan. Upon completion of these review processes, the first trial modification offers under the earned principal forgiveness program may be ready for mailing in the second half of June.
NHRP-eligible loans include subprime, Pay-Option ARM and prime-quality two-year hybrid ARM loans originated by Countrywide on or prior to January 1, 2009, if the amount of principal owed exceeds the current property value by at least 20 percent and the loan is 60 days or more past due.
The United States Department of Treasury has announced a similar earned principal forgiveness concept for HAMP that will be effective later this year and may be considered for a broader range of loans.
“Our tests have shown that many homeowners who are severely underwater on their mortgages will respond positively to a modification offer that includes reduction of their principal balance, increasing the rates of acceptance of HAMP trial modification offers, conversion to permanent modifications and long-term success of the homeowner,” said Jack Schakett, credit loss mitigation executive for Bank of America Home Loans.
“Encouraging more borrowers in this situation to accept a homeownership retention solution may help stabilize the surrounding community to the benefit of neighboring homeowners.”
In the first round of outreach, letters outlining the program and requesting financial information are being sent to certain NHRP-eligible homeowners who are more than 120 days overdue on payments.
“We met our goal to begin offering this program in mid-May, providing opportunities for customers who are in the most imminent danger of foreclosure to begin trial modifications by the end of June,” said Schakett. “At the same time, we are aligning the NHRP enhancement with some guidelines we expect to be included in the government’s program when it is rolled out in the coming months.”
As part of the alignment, Bank of America may offer earned principal forgiveness over a five-year period, as it announced in March, or over the three-year timeframe that Treasury intends to include in its HAMP principal forgiveness design, depending on individual borrower situations.
Since the initial outreach to customers under the NHRP in December 2008 through March of this year, Bank of America has offered an NHRP modification or started an NHRP-eligible trial modification under HAMP for more than 200,000 homeowners. The offers have provided potential aggregate savings of principal and interest totaling $9.1 billion over the full terms of the loans, which exceeds the original three-year estimate of up to $8.4 billion made at the time the program began. More than 100,000 modifications have been completed under the NHRP, and 43,000 more NHRP-eligible homeowners have entered a HAMP trial payment plan. Through all programs, Bank of America has completed more than 600,000 mortgage modifications since January 2008.
Under other provisions of the NHRP, more than $113 million in foreclosure relief payments have been made to former Countrywide customers who went into early default; and $54 million in relocation assistance payments have been made to residents of foreclosed properties, both owners and tenants.
Bank of America
Bank of America is one of the world’s largest financial institutions, serving individual consumers, small- and middle-market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk management products and services. The company provides unmatched convenience in the United States, serving approximately 58 million consumer and small business relationships with more than 5,900 retail banking offices, more than 18,000 ATMs and award-winning online banking with nearly 30 million active users. Bank of America is among the world’s leading wealth management companies and is a global leader in corporate and investment banking and trading across a broad range of asset classes, serving corporations, governments, institutions and individuals around the world. Bank of America offers industry-leading support to approximately 4 million small business owners through a suite of innovative, easy-to-use online products and services. The company serves clients in more than 150 countries. Bank of America Corporation stock /quotes/comstock/13*!bac/quotes/nls/bac (BAC 15.50, +0.06, +0.41%) is a component of the Dow Jones Industrial Average and is listed on the New York Stock Exchange.
I am wondering if I should bother returning the packet BofA just sent to me to apply for a traditional Loan Mod (even though I had to decline one that they offered me almost a year ago since it called for a higher payment, longer term and a balloon payment at the end). I wonder if the packet they sent me is really for this program only it doesn’t say that my principal could be reduced. I wonder if I can call and specifically ask to apply for this program?
More importantly, my loan is $395K and my house is worth $200 and they won’t let me short sale. I have a real hardship and income to pay the now market value. I got lied to and ended up with exactly what is required by this new program so I am trying to come up with a game plan besides walking. Been at this for 3 1/2 years and haven’t paid mortgage in 2 yrs. I had excellent credit and now that they’ve shot that to hell I don’t care about my FICO score. I’d like to keep the house if I can but if not I want to make sure I get out before 2012 so I don’t get hit with a def. judgement. Any advise? Thanks!
Katrina Klein(Quote) (Reply)
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You really should call and ask/demand this. It sounds like you totally qualify. Do you have a friend that is a realtor that could provide you with a Comparative Market Analysis to show your home’s current value that could be presented to the bank? Just be persistent!!!!
Jennifer(Quote) (Reply)
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Thanks! I don’t have someone but since I was just turned down for a short sale last month they have all the recent comps. I can tell you that the only reason why I’m still in my house after being 21 payments late is that I have been as persistent as it is possible to be. I won’t give up. Maybe they’ll get tired of me and finish this whole thing. It’d be nice if I could PLEASE keep my house, but if not it’s been a huge learning experience and 21 months of paying off my other debts!
Katrina Klein(Quote) (Reply)
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Is this program available at other lending institutions IE: Citimortgage?
John F(Quote) (Reply)
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Not that I am aware of. To be honest, I have not seen BofA do much here as of yet.
Moe Bedard(Quote) (Reply)
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Today I received a very long awaited response to my application for the Home Affordable Modification Program from BOA. I was denied for excessive forbearance.
It would appear the listed options I have at this point are:
1) A different modification program that would help me achieve more affordable payments.
2) A forbearance program , which would offer no/low payments for a limited time to get my financial ducks in a row.
3) A short sale.
4) Sign the place over to them. (When Hell freezes over…)
My mortgage is currently overdue by 4 months, which according to them is $10,000. I have accrued THOUSANDS of dollars in principal over the last four years by opting for the lowest payment available on my mortgage.
The loan was originated by Countrywide prior to the cutoff date. Truth is, my loan could be the poster boy for the whole mess.
I gave them financial info to back up my claim of hardship through my application for the Make Home Affordable Mod and their response was to deny me access to my account via the internet and boost my mandatory payments to $2500 a month. It’s how I got to 10K in the hole so fast. And they wonder why I’m failing…
Any suggestions, because i felt like I was hit in the head when I opened up this FedEx envelope and saw I was rejected for the program…
Any suggestions? Because I could REALLY use some right now…
And Thanks,
Stephen
Stephen D. Kirby(Quote) (Reply)
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Hi Stephen,
My suggestions are to keep fighting and make a plan b, c and d so you have back up plans. It looks like they may want to foreclose on you and you need to recognize this as a reality. There is still hope, but the only answer is fro you to fight or to get a nonprofit like http://www.NACA.com to fight for you. You can also join our forum at http://www.LoanSafe.org/forum and get help there.
Good luck!
Moe Bedard(Quote) (Reply)
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Just as an update…I called and asked for the reduction program and was told I ‘pre-qualified’ but that the max reduction would be 30% (@ 3-5% per year) that would also be handed back to me via a 1099! Even if they did 30% I’d still be 165% LTV and get to pay taxes on the 30%!! thanks but…no thanks! If I could afford that I wouldn’t be where I’m at! Nice try at looking like an effort is being made to ‘help’!
Katrina(Quote) (Reply)
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i am in the process of trying to find out what i should do my LTV is 167,000 to 56,000. i am on unemployment at this time i have modified once before in 2009 got a 4% interest rate payment slightly lower with 5000.00 tacked to the back of my loan to be paid off first through next 2 years I,m not sure if any of this stuff is really worth it or who is getting over on who. Can we really trust any of theses programs these mortgagers are who got us here in the first place with false info and promises. but anyway i am not behind yet but wandering if i should be to get better options or like the previous young lady take this time and pay off bills then get out before what she said would happen. anyone have a suggestions
nancy(Quote) (Reply)
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I have been served with foreclosure papers and hired an attorney. I am wondering if is to late to do a HAFA Short sale. I am also wondering if the HAFA Short Sale Program is going to end at the end of 2012 ? If so do you think the program will be extended since it is the only good program out there for the home owner ?
Thank you for any advice you can offer,
Michael
Michael(Quote) (Reply)
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