Bank of America Now Offering Some Principal Forgiveness

Bank of America recently began sending letters to thousands of U.S. homeowners offering to forgive part of the principal balance on their loans by an average of $150,000 each. This reduction could save homeowners up to 35% of their monthly mortgage payment. The principal reduction offers from Bank of America Home Loans are the result of a $25 billion settlement agreement earlier this year with the attorney generals of 49 states as well as federal authorities who had been investigating allegations of abuses over the handling of foreclosures.

Bank of America said it planned to contact more than 200,000 homeowners who could be candidates. BOA expected to send out a majority of the letters by the third quarter of this year. However, to be eligible for the principal reductions, homeowners will have to meet certain requirements, such as having a loan owned or serviced by Bank of America and owing more on the mortgage than the property is worth (underwater). The homeowners must also be at least 60 days behind on payments as of the end of January.

The bank began making such offers in March to a select group of homeowners who were already in the process of seeking mortgage modification. The initial wave of offers were sent to about 5,000 people, which could result in $700 million in forgiven principal. However, homeowners have to make at least three timely payments for the reductions to become permanent. For homeowners who have their mortgage with Bank of America I see this as an excellent opportunity to avoid foreclosure and/or the possibility of filing bankruptcy in Kansas City. Please leave me any questions or comments you may have.