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.

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.

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).

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.

"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.

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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.

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.

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

Yes.

It is a perfect example of a moral hazard.

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

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.

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.