BofA To Forgive Principal Balances To Some

ncrealestateguyMay 12, 2012

To everyone who thinks the big bad banks are out to get everyone:

Tuesday, May 8, 2012 � Bank of America has started sending letters to thousands of homeowners in the United States, offering to forgive a portion of the principal balance on their mortgages by an average of $150,000 each.

The reduction for qualifying homeowners could amount to monthly savings of up to 35 percent on mortgage payments, Bank of America said in a news release on Monday evening.

The principal reduction offers from Bank of America Home Loans are the result of a $25 billion settlement agreement earlier this year with 49 state attorneys general as well as federal authorities who had been investigating allegations of abuses over the handling of foreclosures.

"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," Ron Sturzenegger, a legacy asset servicing executive, said in the statement.

The bank said it planned to contact more than 200,000 homeowners who could be candidates for the offers, sending letters to a majority of them by the third quarter of this year.

To be eligible for the principal reductions, however, homeowners will have to meet certain criteria, including: having a loan owned or serviced by Bank of America; owing more on the mortgage than their property is worth; and being at least 60 days behind on payments as of the end of January.

In the statement, the bank said it had started making such offers in March to a narrower group of homeowners � those who were already in the process of seeking mortgage modification. The bank estimated that the earlier wave of trial reduction offers to about 5,000 people could amount to more than $700 million in forgiven principal. But homeowners have to make at least three timely payments for the reductions to become permanent.

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notto

I read that article and I belong to the NOT happy camp. This is NOT fair to the rest of the people. The banks and owners should work out the payments, without lowering the debt.

Responsible people will be paying through a bailout for this.
I understand that some people are over their heads because the RE market tanked. However, one should NEVER buy a house that costs more then 1 NET paycheck a month (mortgage). This way, even if things go wrong, you'll be able to always pay you mortgage. I've always lived by that rule. I live within my means. Then again, I worked and paid my way through college.

    Bookmark   May 13, 2012 at 9:06AM
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berniek

"I read that article and I belong to the NOT happy camp. This is NOT fair to the rest of the people. The banks and owners should work out the payments, without lowering the debt."

Why not? There are many reasons people are in bad financial situations and not because they caused it.
Taxpayers helped these institutions that were too big to fail, why can't it be the other way around and now they help the people who need it?

    Bookmark   May 13, 2012 at 1:42PM
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notto

"I read that article and I belong to the NOT happy camp. This is NOT fair to the rest of the people. The banks and owners should work out the payments, without lowering the debt."
Why not? There are many reasons people are in bad financial situations and not because they caused it.
Taxpayers helped these institutions that were too big to fail, why can't it be the other way around and now they help the people who need it?
_________________________________________________________

Ummm, because either EVERYBODY gets 150k off their mortgages or nobody. As you can see taking off approx 150k means that these people probably live in homes that are not cheap.
Is it fair for some person who lives in a 130k house to pay for a bailout for someone who lives in a million dollar house?
I don't think so.
Besides, personal responsibility is the key. I'm not saying that banks should not work with the people to extend their loans etc, but to decrease their loans and make OTHER people pay through taxes (stimulus) is criminal.

We in this household are NOT in the same place we were a few years ago, so should we jump on the "irresponsible" bandwagon?

Oh yeah, next are BAILOUTS for the student loans....and I paid for my own college. This blows for me. I could have a nice retirement account.... if I only stuck it to the taxpayer! Gee sometimes, I wonder who is the fool. America is wonderful, just make your moves so the you can use OPM (other peoples' money).

    Bookmark   May 13, 2012 at 2:59PM
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berniek

"Ummm, because either EVERYBODY gets 150k off their mortgages or nobody."

Not everybody is in your position/situation, you seem to be doing ok.

"Besides, personal responsibility is the key."

Personal responsibility for what? Take responsibility for this recession/depression? Hardly.

    Bookmark   May 13, 2012 at 6:08PM
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notto

Posted by berniek (My Page) on Sun, May 13, 12 at 18:08

"Ummm, because either EVERYBODY gets 150k off their mortgages or nobody."
Not everybody is in your position/situation, you seem to be doing ok.

"Besides, personal responsibility is the key."

Personal responsibility for what? Take responsibility for this recession/depression? Hardly.

____________________________________________________

So you think that a person sitting in a restaurant, eating chopped steak should pay for the next guy's filet mignon?

Yes, this recession/depression has done most people in, but the ones who lived within their means (by eating chopped steak) are bailing the filet mignon-ers out.
Sorry, I disagree.

    Bookmark   May 13, 2012 at 6:16PM
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ncrealestateguy

When I read this story I felt just like Notto, and then 5 seconds later I felt just like Berniek.
Both scenarios are crappy, and whichever way it is that we eventually get out of this mess, let's not divide this Country's people more than it currently is. Let's just remember that in the future, it does no good to make money too cheap. There should be some sensible requirements to get a loan. Not everyone will get there in their lifetime. that is just the way life is.

    Bookmark   May 13, 2012 at 6:25PM
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chispa

I hope no help is going to those that refinanced, pulled cash out and spent it on "toys". I see plenty of short sales were the current sales price is double the original price, but due to refinancing and pulling money out it is a short sale. Those sellers should be making a nice profit, but instead the taxpayers are covering the bank's losses. I believe that the redefault rate is pretty high among those that have received modifications. Let's hope BofA is picking their custoners carefully.

    Bookmark   May 13, 2012 at 7:35PM
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Billl

Not sure how people are reading "bailout" into this. The settlement with the Feds called for banks to spend $25 billion in loan modifications, not taxpayers. BoA repaid TARP funds almost immediately so they could start giving out big bonuses to managers again.

In the end, this is just a business proposition to the lender. A certain percentage of people always default not matter what the terms of a loan. That costs huge $$$ for the lender. The lenders are betting that by modifying loans, they will reduce that percentage.

    Bookmark   May 14, 2012 at 8:46AM
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mike_home

"To be eligible for the principal reductions, however, homeowners will have to meet certain criteria, including: having a loan owned or serviced by Bank of America; owing more on the mortgage than their property is worth; and being at least 60 days behind on payments as of the end of January."

If I understand this correctly, homeowners who are up to date with their mortgage payments will not qualify. Is this correct?

    Bookmark   May 14, 2012 at 9:09AM
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writersblock

>If I understand this correctly, homeowners who are up to date with their mortgage payments will not qualify. Is this correct?

Yes.

    Bookmark   May 14, 2012 at 10:18AM
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berniek

"So you think that a person sitting in a restaurant, eating chopped steak should pay for the next guy's filet mignon?

Yes, this recession/depression has done most people in, but the ones who lived within their means (by eating chopped steak) are bailing the filet mignon-ers out.
Sorry, I disagree."

I am not talking about people who caused their own demise. I'm saying the ones who ended up in a bad financial position THROUGH NO FAULT OF THEIR OWN.

    Bookmark   May 14, 2012 at 10:46AM
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brickeyee

Socialize the losses, privatize the gains.

It is a perfect example of a moral hazard.

A third party covers the losses, the first party picks up the gains.

    Bookmark   May 14, 2012 at 10:46AM
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mike_home

Wouldn't it be more productive to allow people whose houses are worth less than the mortgage amount to refinance their mortgage at today's rate with no closing costs? It would seem to me it would be fair to those who continue to make payments as well as those have fallen behind in their obligation to the bank.

    Bookmark   May 14, 2012 at 2:45PM
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tishtoshnm Zone 6/NM

This does not really change my opinion of the banks. It is a prudent measure on their part, done as part of a settlement in the hopes of avoiding worse penalties/judgment. I do hope that it truly helps those who truly need it though.

    Bookmark   May 14, 2012 at 2:55PM
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Billl

BofA isn't just being nice. This is a reaction to some consumers choosing "strategic default." Lots of people are choosing to walk away from homes that are deeply underwater. They've done the calculation and are willing to take a credit hit instead of continuing paying for a $500k house that is only worth $250k. The bank is using some criteria to try to spot those people and offer to reduce the principle. Out of the ten of millions of underwater homeowners, BofA has identified 200k who are likely to choose "strategic default" and are offering to make a deal.

    Bookmark   May 14, 2012 at 3:04PM
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brickeyee

"BofA isn't just being nice. This is a reaction to some consumers choosing "strategic default.""

This.

BofA is figuring they can keep paying borrowers in the house.

The write down comes off the banks asset value the reserves are based on, but only the right down instead of the whole mortgage balance.

The new mortgage is a performing asset and BofA believes it is less likely to enter default.

It is less expensive to forgive some debt that foreclose.

    Bookmark   May 14, 2012 at 3:41PM
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