BOFA Loan Mod Approval Letter! Quick question??

[scottjb78]

So I stopped paying about 6 months ago on my Neg Am MTA Index Loan. BOFA has not worked with me up until a few days ago. Received a letter Via fedex.

Its says at the top of the letter in bold writing "You are approved for a Principal Reduction Loan Modification". Then it has a phone number to call.

The terms of the loan mod are this:

* Original amount including late fees: $505,098.36
* There is a principal reduction to: $378,824.36
* Fixed rate at 5.5% until the end of the term which is 25 years from now.
* The monthly payment is being reamortized over a 480 month period which brings the monthly payment to $1953.86.
* At the end of the 25 years it would have a remaining balance of $234,797.71 which would be due as a balloon payment. They've said if I pay more than the 40 year payment this number would be smaller or paid off by the end of the 25 year term. Current mortgage ends in 25 years so this makes since!

So far its a great deal! I want to see the modification agreement but they insist I make the first payment by the 19th of this month to show good faith on my part before they'll ship it out for me to sign. Does this look like a scam to you guys? Should'nt I have a chance to review the agreement just as good business practice before sending anymore money?

I called and told them this bothered me and they are putting in with a different department. Do I have to be concerned that they would just take my money and not honor this agreement? Could I write the check and write pending loan agreement just incase they don't approve it? They say its approved and not to worry.

I like the terms and they are also saying they don't need to verify any financial information or documents.

What do you guys think?

[Moe Bedard]

Think of this like when you had good credit and would get those offers for a free boat cruise and 0% interest forever and ever because banks lend money for free. You and I know that is not true and we are finding out that sometimes they do not tell the truth when offering loan modifications. But sometimes they tell the truth and you will get what they offer.

The problem is that you owe the bank money and they are trying to collect. Think of it like poker. It is legal lying and they can be bluffing or telling the truth and you'll never know unless you play the hand.

With that said, is it worth the gamble?

[nativelasvegan]

I am to understand that the balloon of $235,000 is a good deal? How do you figure that?

A verbal agreement is worthless. The statute of frauds requires every agreement to be in writing. Sorry, don't have much faith in the banksters these days. Sure your monthly payment might make a difference but the balloon is what would scare the hell out of me. What sweeties. If you paid off your loan in 25 years you owe $235,000. How about a program that amortizes the loan at 40 years with no balloon? What is the balloon at the end of a 40 year term?

I understand your goal is probably to stay in the house now at an affordable payment. So is mine. What are your long term goals? If the monthly payment is your only concern and you choose to stay only a few years and sell when the market stabilizes (my opinion 10+ years before that happens), then it is a good deal.? Balloon still scares me. It will have to be paid even if you refinance or sell.

You mentioned "I want to see the modification agreement but they insist I make the first payment by the 19th of this month ..." You are correct that good business practice would lead one to believe that you actually sign something that has the terms in it instead of relying on a verbal agreement.

Please know that the opinions on this forum are just that, opinions. Keep your post up and after you read a lot, you will be in a better, educated position to make a good choice. Good luck.

[ama125]

My only comment is that from many recent posts and from what my negotiator has told me, is they are now sending out a letter requesting a first payment. Once received, they will send out the actual agreement. I do not know why they are doing it this way, but that is the case. I am going to be faced with this same sort of thing (send in first payment and then get the trial plan agreement). This principal reduction loan mod is a new program they are offering. It appears they are trying to be proactive in stemming the next wave of foreclosures (ie neg am loans/pay option arms). Here is a recent article on that and may explain why we are seeing this new program: California AG Calls on Lenders to Outline Option ARM Modification Plans

[yomann]

So, the way I am seeing this, you have a letter in writing, but no contract to sign as of yet.
They are asking for a good faith payment of $1953 while they draw up the contract.
Is the $1,953/mth an affordabe payment for you in the long run ?
You have also being living "rent free" for 6 months.
If I was in your place, I would make that ONE payment of $1,953 and insist on a contract before the second payment is due ......
Looking at it from the bank's perspective, why draw up a detailed contract unless they have a firm indication the homeowner is going to go with it.
JMO, and take in all the thoughts from the members here, and make your own informed decision.

[scarylarry]

AMA,
Great link, it might be a game changer for me. BofA is telling me I am approved for the NHRP mod (under CA AG Settlement)
thanks

[scottjb78]

I think this is an important step in the right direction! To clarify what the balloon payment is: Basically the original loan is due in 25 years from now. The balloon payment is just the remaining balance of the loan at 25 years. I can pay down faster if I want. The reason why there is still a balance is because the payments are setup as if it were a 40 year loan. If it expired in 40 years then there would be no balloon payment. So from what I can see this is a good deal!

I called the bank and spoke with two people yesterday. I have until the 19th of this month so I am fighting them on getting a contract sent out before then. As we get closer to that date I will debate on whether taking a gamble and making a payment without the formal agreement.

I will keep everyone up to date.

[BadBobMo]

What you will be able to do is live where you are now that is a good thing!
If you are looking for a little nest egg for your Kid's not so good!
Go over to bank-rate and use the tools over their for your own good!
Good Luck

[BadBobMo]

Principal Reduction

One more thing this is not a principal reduction. "Principal-Forbearance"
You might want to also look up the difference!

[lemaudit]

I always like how they ask us for a good faith payment. How about they offer a good faith contract, written in terms we can understand.

[jojolala]

As I've posted elsewhere, I've received this letter too. I don't trust that we'll be approved as the first paragraph goes on to describe further documentation and evaluation will determine eligibilty. The letter says a packet will be delivered in the next couple of days, but does not describe that receipt of the first payment triggers the sending of that packet. I think they are trying to get money and this is the carrot.

[scottjb78]

I am going to have to work with them and go with my gut feeling on this one about the payment.

I can tell you however that the letter says I don't need to provide any other documentation or financial records. It says its a principal reduction with the terms clearly written out.

I have talked to three different people over there to test them and they are all very clear on the phone what the terms are. Usually people say different things over there but its all been the same so that gives me a better feeling about it. No run arounds with them since I got the letter.

My over all experience with BOFA for over 12 years now is that they have never done me wrong as long as they were clear about things. They have never stolen money from me or swindled me into a payment.

I will work on it some more and let everyone knows what turns out. Hopefully this story will give people more thoughts as to what these banks are up to. etc..

[jojolala]

So they are really reducing your principal from 505 to 378K and the difference is not part of the balloon balance at the end of 25 years?

[THANKS2U]

Originally Posted by jojolala

So they are really reducing your principal from 505 to 378K and the difference is not part of the balloon balance at the end of 25 years?

Sounds like only a fair deal - Not GREAT but ONLY fair.

If you want to stay in the hosue for at least 10 years & you can afford it go for it. Hopefully the market will provide your balloon payment ?

But, After 25 years your HUGE Principal Forbearance Balloon will be due !

Or when you sell it / the Principal Forbearance will be due..

This is a principal forbearance -Just a basic PP / Principal Postponement

It is not a true FPR / Forgiven Principal Reduction.

Or an EPR / Extinguished Principal Reduction

You might want to ask to split the difference on the Balloon Payment.

As in asking them for a True Principal Reduction to half of what they are asking, as they know the market will never acheive from a short sale or a foreclosure, as form you are willing to do, as half the balloon payment due that they are trying to get from you ...

Tell them you will sign the papers if they cut the balloon payment in half !

If they refuse, you can still sign it and there is always BK if necessary

[hope67]

Originally Posted by nativelasvegan

I am to understand that the balloon of $235,000 is a good deal? How do you figure that?

The balloon is due to the fact the loan is being amortized over 40 years and it is due in 25 years, however, he can refinance then.

[hope67]

Originally Posted by BadBobMo

One more thing this is not a principal reduction. "Principal-Forbearance"
You might want to also look up the difference!

It is a principal reduction..it is not a principal forbearance. In other words, the bank is forgiving the difference between 505,098.36 (current balance) and 378,824.36 (new balance), the balloon payment is due to the fact the 378,824.36 is being amortized over a long period of time (40 years) but the loan is due in 25 years. As I mentioned before he can refinance then if he didn't sell his house before the 25 years are over.

[hope67]

Originally Posted by THANKS2U

Sounds like only a fair deal - Not GREAT but ONLY fair.

Actually it is a FANTASTIC OFFER, keep in mind that it is indeed a principal reduction and it is not principal forbearance.

[jojolala]

Well then there is hope for us all... Congratulations.... I agree that is a GREAT DEAL!

[hope67]

Originally Posted by scottjb78

So I stopped paying about 6 months ago on my Neg Am MTA Index Loan. BOFA has not worked with me up until a few days ago. Received a letter Via fedex.

Its says at the top of the letter in bold writing "You are approved for a Principal Reduction Loan Modification". Then it has a phone number to call.

The terms of the loan mod are this:

* Original amount including late fees: $505,098.36
* There is a principal reduction to: $378,824.36
* Fixed rate at 5.5% until the end of the term which is 25 years from now.
* The monthly payment is being reamortized over a 480 month period which brings the monthly payment to $1953.86.
* At the end of the 25 years it would have a remaining balance of $234,797.71 which would be due as a balloon payment. They've said if I pay more than the 40 year payment this number would be smaller or paid off by the end of the 25 year term. Current mortgage ends in 25 years so this makes since!

So far its a great deal! I want to see the modification agreement but they insist I make the first payment by the 19th of this month to show good faith on my part before they'll ship it out for me to sign. Does this look like a scam to you guys? Should'nt I have a chance to review the agreement just as good business practice before sending anymore money?

I called and told them this bothered me and they are putting in with a different department. Do I have to be concerned that they would just take my money and not honor this agreement? Could I write the check and write pending loan agreement just incase they don't approve it? They say its approved and not to worry.

I like the terms and they are also saying they don't need to verify any financial information or documents.

What do you guys think?

Scott..I think this a fantastic offer, I understand you are worried about making the 1st payment before receiving the agreement. Why don't you call several times to make sure you get the same info everytime. Good luck!

[scottjb78]

Thanks guys! I will persue it more on Monday and fight to get the agreement before hand. The letter itself is pretty direct and to the point so things are starting to look better.

[BadBobMo]

reduction
go look up this word!
I don't know but being a Realtor for many years I always thought I new what reduction meant!
Good Luck And if you say you trust the bank then what can I say.

[lemaudit]

Originally Posted by hope67

The balloon is due to the fact the loan is being amortized over 40 years and it is due in 25 years, however, he can refinance then.

hmmm, when have I heard that before? Oh, yeah.

"Here sign this you'll be refinanced in two years any way. You'll be out of this loan by then. The only thing that could possibly screw that up is if the economy and the housing market tanked at the same time and that's never going to happen ... really trust me."

oops

[davephx]

Gosh. BOA often the most hard to work with looks like it does a internal mod with huge prin reduction. This seems fantastic.

Is the reduced amount close to market value I wonder?

[MyHAMP]

Can somebody please enlighten me how this loan works? A balloon after 25 years on a 40 year loan? So if the balloon is due and paid after 25 years, what is the borrower supposed to pay over the remaining 15 years?

I would understand a balloon at the end of the 40 years - but in the middle of the loan? What's that?

[lemaudit]

Originally Posted by MyHAMP

Can somebody please enlighten me how this loan works? A balloon after 25 years on a 40 year loan? So if the balloon is due and paid after 25 years, what is the borrower supposed to pay over the remaining 15 years?

I would understand a balloon at the end of the 40 years - but in the middle of the loan? What's that?

Why is there even a balloon payment? And a 40 year loan is supposed to make the original 30 year loan easier. Not more bondage. This is a typical crap loan that got everyone in trouble.

We've got a lot of people here who have been at this for a while and don't like the smell of it. Too many people here are confused by this for it to be any good. Spend the $100/hour for a lawyer to look at it for a couple of hours.