by Broderick Perkins
(5/8/2012) ERATE Exclusive - If Bank of America's National Mortgage Settlement deal is any indication of what's to come from other lenders, hard-working homeowners who pay their mortgage are, well, it rhymes with shucked.
BofA is offering principal reductions of tens of thousands of dollars - some reports say as much as $150,000 - but only to those who are at least 60 days behind on payments as of Jan. 31, 2012.
The bank plans to reduce qualified homeowners' mortgage balance to as low as 100 percent of the current property value, then lower the interest rate and take away more principal, to reach a target payment that's affordable to the homeowners.
Those lucky enough to qualify can expect to have 30 percent of their mortgage payment sliced from their monthly bill.
The raw deal for on-time mortgage paying stiffs also requires:
• Underwater status. The homeowner must owe more on the mortgage than the property is worth.
• A big housing bill. The homeowner must have a contractual monthly payment for principal, interest, property taxes, hazard insurance and any applicable homeowner association fees totaling more than 25 percent of gross household income.
• BofA ownership. The mortgage must be owned and serviced by Bank of America, or serviced for another investor that has given the bank delegated authority to do modifications.
The estimated 200,000 homeowners will begin receiving letters this week, with most of the letters mailed by the third quarter this year. The letters provide each homeowner with a description of the program and an invitation to provide financial information to begin the review process.
Bank of America has offered principal forgiveness, but in more limited, targeted situations to eligible borrowers with certain types of mortgages.
"Building on home retention and payment assistance programs already in place, we are meeting our obligation to deliver this additional relief to our customers following the completion of the recent global mortgage settlement," said Ron Sturzenegger, BofA's Legacy Asset Servicing executive.
"To the extent principal reduction and other modification tools help us turn mortgages headed for possible foreclosure into long-term performing loans, it will be positive for homeowners, mortgage investors and communities," he added.
Some, but not most.
Fannie Mae, Freddie Mac, the Federal Housing Administration (FHA) and the U.S. Department of Veterans Affairs (VA) are not participating in the principal reduction program. They do, however, offer other modification programs.
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