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Bank of America Second Lien Mortgage Debt Extinguishment Q&A

Discussion in 'Bank of America Mortgage Help' started by Cat Damiano, Oct 3, 2012.

  1. Cat Damiano

    Cat Damiano Mortgage Wars

    As part of Bank of America’s ongoing efforts to help customers in need of mortgage assistance, this company is in the process of mailing approximately 150,000 letters to pre-qualified homeowners offering automatic extinguishment of their second lien mortgages. The intention of the program is to place homeowners in an improved financial situation by reducing their monthly debt obligations and, potentially, help them create equity in their property.

    The full forgiveness of second lien balances on eligible loans is being extended under Bank of America’s participation in the 2012 national mortgage settlement among the five largest mortgage servicers, 49 state attorneys general and the federal government.

    Letters that began mailing in July 2012 and continue through the end of this year inform predetermined eligible homeowners that the full balance of their Bank of America-owned and -serviced second lien mortgage will be forgiven and the bank’s lien on the collateral property will be released free and clear, unless the customer opts out of this relief offer within 30 days of receiving the letter.

    Questions and Answers

    1. What is the second lien mortgage elimination offer?
    We are offering eligible customers who are behind on their home loan payments the opportunity to have their remaining second lien mortgage debt eliminated. With this offer, the full unpaid principal balance on the second lien mortgage will be eliminated.

    2. Why is Bank of America doing this?
    These offers are part of Bank of America’s ongoing efforts to help customers in need of mortgage assistance and are among the customer relief programs we have launched under the national settlement agreement between the five largest mortgage servicers, state attorneys general and the federal government. The goal is to help customers remain in their homes and avoid foreclosure whenever possible. By eliminating this debt for eligible customers, we are trying to help them get back on track financially with their first mortgage payments and return to sustainable homeownership.

    3. Who is eligible for the offer?
    To qualify, customers must currently have a second lien mortgage owned and serviced by Bank of America that meets certain threshold delinquency or property value criteria, or a second lien mortgage associated with a first lien mortgage that is severely delinquent. Only second lien mortgages owned and serviced by Bank of America are eligible for this extinguishment program. It does not matter who owns and services the first lien mortgage. The vast majority of the second lien mortgages eligible for this program are in default in their subordinate lien position. A small number of second lien mortgages that are paid current will be extinguished if they are associated with a first lien mortgage that meets the program criteria.

    4. How are you contacting eligible customers?
    Eligible customers will receive letters from Bank of America via Federal Express or certified mail, explaining the offer to have their second lien mortgage debt eliminated. Mailings began in late July. At this time, only customers receiving letters will be eligible for the program.

    5. Do customers have to accept the offer?
    We will eliminate the remaining second lien mortgage debt for eligible customers, unless they contact the bank to decline the offer within 30 days of receiving the offer letter. Customers are asked to contact a Bank of America Home Loans representative at 1.800.496.7831 if they have questions or wish to decline the offer.

    6. Are customers who are not contacted by the bank eligible for this program?
    We will be contacting customers who are eligible to have their second lien mortgage debt eliminated. Customers cannot request to be part of the program.

    7. How will second lien mortgage elimination impact the first mortgage?
    The elimination of the second lien mortgage is completely separate from any actions being taken regarding the first mortgage. If the first mortgage is in foreclosure, those foreclosure activities may continue.

    8. What happens if the customer is in foreclosure?
    Although the second lien mortgage balance is being forgiven and the lien on this second mortgage is being extinguished, this action does not extinguish the customer’s first mortgage. If a customer’s first lien mortgage is impacted and in foreclosure, this will not stop the foreclosure proceedings; foreclosure activities are likely to continue. Customers should continue to answer and reply to all foreclosure communications from their first lien lender. If customers do not understand the legal consequences of the foreclosure, we encourage them to contact an attorney or housing counselor for assistance.

    9. What are the tax implications of the forgiveness?
    Bank of America may be required to report the amount of the eliminated second lien mortgage debt to the Internal Revenue Service. Current federal law provides for certain exceptions to tax liability when debt is forgiven in connection with a foreclosure prevention transaction for some customers; however, debt elimination may trigger state and federal income tax liabilities for customers. To understand whether they qualify for one of these exceptions and what other tax implications this transaction may have, we urge customers to contact a tax professional. Additional information on mortgage debt forgiveness can be found at www.irs.gov.

    10. How does this affect Bank of America’s implementation of the terms of the agreement?
    The program is consistent with the provisions of the agreement for second lien mortgage debt forgiveness.

    11. Are there other ways that customers can have their second lien mortgage debt eliminated?
    Additional government-sponsored and proprietary Bank of America programs are available which may involve the partial or full elimination of second lien loans. Interested customers should call 1.800.669.6607 or visit Home Equity Loan Modification | Bank of America.

    12. For a home mortgage loan, what is the difference between principal reduction or forgiveness and lien elimination?
    If a lender forgives a portion of a home loan’s principal balance, the borrower is responsible for the remaining balance due and the lender retains its lien on the borrower’s property as collateral for the loan. In a lien elimination, the entire balance of a mortgage loan is reduced to zero, the lien securing the loan is released and the mortgage note is cancelled. The lender has no further claim to the borrower’s property as collateral, and no further monetary claims against the customer.

    13. Will a customer benefit if their second lien mortgage debt has been discharged in a bankruptcy filing?
    Yes. While customers who have filed for bankruptcy and receive a discharge of their second lien mortgage debt obligations are no longer personally liable for the debt, the bank still remains a lien holder to the extent of the remaining balance on the second lien. This means the bank still has a legal claim to the customer’s property as collateral to satisfy the second lien mortgage debt still owed through a court-approved foreclosure, or if the property is sold for a gain. Once the debt is cancelled and the lien extinguished or released (subject to court approval, if required), the bank relinquishes any further monetary or collateral claim to the property. This reduces the debt attached to the property and may provide the opportunity for the borrower to build equity in their home. Because the underlying personal obligation for the debt was discharged in bankruptcy, the bank will not report debt forgiveness to the IRS as a result of this transaction.

    14. Will this affect the customer’s credit rating?
    Through the extinguishment program, we will report to the major credit bureaus that the customer’s second lien mortgage is now “paid and closed” and has a zero balance, which could affect a customer’s credit rating. A credit score is determined by the customer’s credit history and is not controlled by Bank of America. Customers should review information on credit scores at Need Credit or Insurance? Your Credit Score Helps Determine What You’ll Pay.

    15. If the lien is extinguished in a bankruptcy filing, what are the credit reporting implications?
    In the event debt is discharged through bankruptcy, the credit bureaus normally reflect that event as a loan or a debt discharge in a bankruptcy filing. Through the extinguishment program, we will report to the credit bureaus that the customer’s second lien mortgage is now “paid and closed” and has a zero balance.

    16. How will Bank of America help customers who are still in need of assistance following the elimination of their second lien mortgage with the bank?
    We want to work with customers to address their financial needs, especially if they are in need of assistance. Customers can always visit one of the 50 Customer Assistance centers in cities around the country or call 1.800.669.6607 or visit Home Equity Loan Modification | Bank of America to find out about available programs.

    Bank of America Notifies Eligible Mortgage Customers of Second Lien Mortgage Debt Extinguishment | Bank of America Newsroom
  2. TomEason

    TomEason LoanSafe Guide Staff Member

    Hi Cat,

    Thanks for starting this thread; there is definitely a need for it.

    I think it's important to disclose to members that the "Questions and Answers" is quoted verbatim from BOA "propaganda".

    The following paragraph is an example of that. BOA is not doing this to help borrowers as much as it is to help themselves. Why do I say this? Because BOA receives a cash incentive from Treasury for each extinguishment, per the settlement agreement.

    2. Why is Bank of America doing this?
    These offers are part of Bank of America’s ongoing efforts to help customers in need of mortgage assistance and are among the customer relief programs we have launched under the national settlement agreement between the five largest mortgage servicers, state attorneys general and the federal government. The goal is to help customers remain in their homes and avoid foreclosure whenever possible. By eliminating this debt for eligible customers, we are trying to help them get back on track financially with their first mortgage payments and return to sustainable home-ownership.
    Last edited: Oct 3, 2012
  3. Cat Damiano

    Cat Damiano Mortgage Wars

    Tom,

    Thanks for your post, that is precisely why I included the link from which it came at the bottom of my post. I felt it important to lay it all out here in one place so that we are able to link to it from within the forum should questions arise.
  4. TomEason

    TomEason LoanSafe Guide Staff Member

    Hi Cat

    Thanks for your reply.

    I hadn't followed that link before my posting. As I said, this thread is definitely needed.

    Thanks for starting it.
  5. kenneth

    kenneth LoanSafe Member

    why all the help for second lien i have never had second lien just a 1st i was sent a fedx letter saying met all requirement and sent it back with all they ask for did not hear a word just sent me foreclourser papers i call and ask way neg npv test and what they put in was wrong?
  6. unhappybofacustomer

    unhappybofacustomer LoanSafe Member

    Hi Cat - thank you for post, very interesting! One question. It states: "To qualify, customers must currently have a second lien mortgage owned and serviced by Bank of America". Do you know if this D.O.J. settlement also has an option for extinguishment on second liens that are serviced by Bank of America, but not owned by Bank of America?
    My first lien is not in arrears...
  7. Cat Damiano

    Cat Damiano Mortgage Wars

    No, the settlement is for the second liens that are owned and serviced by one of the five lenders named in the settlement. So, BofA's monies will go to the loans that they own, Chase, to the loans that they own and so forth.
  8. geedub

    geedub LoanSafe Member

    I actually received my letter last night confiming that my 2nd has been forgiven. An absolute shot out of the blue!
  9. unhappybofacustomer

    unhappybofacustomer LoanSafe Member

    Cat - one more question :)
    In regard to the regulations ordained by the courts for the D.O.J., Global Settlement, it states to be eligible you must: "Has a loan that is owned and serviced by Bank of America, or serviced for another investor that has given the bank delegated authority to do such modifications". I interpret that to mean that if the investor has given Bank of America authority to service their loans, then I may be eligible. Also, I have seen on other threads - success stories of second lien extinguishments that are only serviced by BofA and not owned by them. I am so confused, lol!
  10. Cat Damiano

    Cat Damiano Mortgage Wars

    Congratulations, that is really great news!
  11. Cat Damiano

    Cat Damiano Mortgage Wars

    That applies to the modification of first liens, not the forgiveness of the second liens that these letters are being sent for.
  12. unhappybofacustomer

    unhappybofacustomer LoanSafe Member

    Thank you Cat for your time and answers, much appreciated! I guess, I have to go another route. Oh well. Thanks again!!

  13. TomEason

    TomEason LoanSafe Guide Staff Member

  14. geedub

    geedub LoanSafe Member

  15. chabsin

    chabsin LoanSafe Member

    Does anyone have definitive info about whether 2nds on investment properties are eligible for this?
  16. Luckyone

    Luckyone LoanSafe Member

    I had 2 Heloc's extinguished!! as BofA says in the Fed Ex letters I received. one in Sep 2012 and the other this Month, both properties total combined were for a total $265K gone, and one property did not have a first!!??? I am a "Luckyone" still have two more Heloc's to go. I did stop paying on them in the begining of this year. had some few calls and letters in July-August, but never answered them nor called them. just was tired of paying interest only, and not going anywhere, houses were upside down with these 2nd, I did lose the other one thru foreclosure. but I was still upside down with the first. so I am Very happy to hear that many others are getting the same Fed Ex letters. I will keep you posted if the other two get "extinguished" one is a fixed Heloc and is being taken of my account directly every month, wondering if I should stop paying that one or take of the automatic payment. the other Heloc I have I also stopped paying the same time the other 2. any suggestions on the HELOC that is now a fixed 2nd, should I stop paying it?. my house is upside down with that Heloc loan. these HELOC's are all with BofA.
  17. Cat Damiano

    Cat Damiano Mortgage Wars

    That is great news, Congratulations!!
  18. Grimmhope

    Grimmhope LoanSafe Member

    geedub, I too received a Fed Ex from BoA on Friday 10/5/12. I was totally surprised, especially since I have been trying to work with them since i filed for CH 13 in 11/11 and am looking at converting it into a CH 7. I am soo disgusted with them it's not even funny.

    They forgave $147K on my second loan.
  19. Luckyone

    Luckyone LoanSafe Member

    Have two HELOC's that are thru BOA, one was turned to a fixed 2nd , can these two be extinguished if still paying, or do I need to do the opposite?, I am upside down with these Heloc's if removed I will not be underwater.
  20. cbadjoe

    cbadjoe LoanSafe Member

    Does anybody have any information on whether any of the other lenders are doing this? I have a HELOC that was originated with Charles Schwab and until last month was still with them. Last month the servicing was switched to Quicken. It's for 275K of which about 100K is under water. I am current but am seriously considering not making the payment on the HELOC. My original thinking was to tackle the first and then deal with the second but now I am thinking maybe it's better to do them both at the same time. Also, the ex is still on the loan but not on title. Does anyone have any info on whether I can negotiate her credit out of this and take the entire hit myself?

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