Bank of America is making a big move to help troubled homeowners. And some wonder if other banks will follow the move. Bank of America announced it will forgive up to 30% of the mortgage balance held by some of its customers. The homeowners must meet the following qualifications:
- The homeowner must be at least 60 days delinquent on their mortgage loan.
- They must owe more than 120% of the value of their home.
- Borrowers must also qualify for Obama administration’s $75 billion loan modification program
Bank of America estimates that about 45,000 of its customers will qualify for this new program which was developed out of a legal issue over high-risk loans made by Countrywide Financial Group. The loans will include mainly subprime and adjustable rate mortgages, or ARMs. “They’re talking about doing something and talking seriously about it,” Julia Gordon, senior policy counsel at the Center for Responsible Lending, a consumer group, said of Treasury officials in a report from Pantagraph.com. “I think the concern now is fairness and making sure that the public understands the importance of principal reductions toward stabilizing the housing market and helping everybody.”
This new program begins in May and includes an initial offer to set aside a portion of the mortgage’s principal balance, interest free. If the homeowner doesn’t miss any payments, that portion– a maximum of 30%– will be forgiven over five years. While it will help homeowners, the move will bring their loan amount more in line with the actual value of the home in the current market.
According to a report by CNBC, Bank of America had only completed loan modifications under the government’s new program for 22,000 people which accounted for about 8% of those who had signed up for a modification. Wells Fargo had completed modifications for 12% of interested homeowners and JP Morgan Chase and Citigroup were at 11%.
Image courtesy of respres
Tags: Subprime mortgage crisis, Mortgage, Bank of America Home Loans, Finance, Bank of America
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