Will Bank of America's Principal Forgiveness Program bring borrowers back from the brink of foreclosure?
Thousands of homeowners underwater on their Bank of America mortgages could receive one of the 200,000 letters the bank is sending out offering partial loan forgiveness. According to Bankrate.com, BofA borrowers have to clear a pretty significant series of hurdles in order to qualify for the “principal reduction program”:
To be eligible for this principal reduction program, a borrower must:
- Owe more on the mortgage than the home is worth.
- Have been at least 60 days behind on the mortgage payments, as of Jan. 31. (I don’t get it either but that’s the rule.)
- Have monthly housing expenses of more than 25 percent of gross household income. The expenses include mortgage principal payments, interest, property taxes, homeowners insurance and homeowner association fees.
- Have a loan that is owned and serviced by Bank of America, or serviced for an investor who has given the bank the authority to do this type of modification.
We already know that major lenders are being pretty tight-fisted when it comes to new mortgages, so this program probably won’t have any real impact on the bank’s bottom line. It’s likely just a way for Bank of America to improve its tarnished image.
Still, what kind of message does the “principal forgiveness program” send out to borrowers? And do you think it’ll keep people at risk of foreclosure in their home?