If you bought a home in Port St. Lucie, Stuart, or Jensen Beach and Bank of America is your lender, you may be in for pleasant surprise. I never thought I’d hear “Bank Of America” and “pleasant” used in the same sentence, but their new policies on mortgage modifications could be very pleasant to their sub prime and ARM (Adjustable Rate Mortgages) customers. Bank of America has just announced new changes in the way they are going to handle many of their sub prime mortgage and ARM modifications. The new policies are designed to help the home owner while minimizing the damage to the investors who own the notes. Most of these loans were originated by Countrywide Home Loans, which Bank of America acquired in 2008, but it is expected to use the same policies on some of their own problem loans if the program succeeds. This may also put pressure on some of the other big lenders to follow suit.

 

Loan Modification Green Road Sign © Andy Dean - Fotolia.com
© Andy Dean – Fotolia.com

Bank of America will now look at principal reduction as the first step in a mortgage modification on it’s mortgages with the highest delinquency rates. These would be their sub prime loans, Pay-Option ARMs, and prime two-year hybrid ARMs that are 60 days or more behind in payments with a principal balance of 120 percent loan to value, or more. The mortgages that qualify for this program must also meet the qualifications for their National Homeownership Retention Program (NHRP) and basic qualifications of the government’s Home Affordable Modification Program (HAMP).

This new plan will look at principle reduction first and, if necessary,  rate reduction of the loan to bring the payments down to 31% of the borrowers household income. This will be an “earned principal forgiveness” system, where borrowers are offered an interest-free forbearance of principal (amount of principle decreased is still owed in a forbearance, payment is just held off) that they can turn into forgiven principal over five years. The maximum reduction will be a 30 percent decrease in the loan principal balance to as low as a 100 loan-to-value ratio.  For the first five years of the modification, up to 30% of the forbearance will be forgiven each year, as long as the borrower stays on track with their payments. In the first three years (out of the five years), the forgiven forbearance will be 20% per year. In the fourth and fifth years the amount forgiven will be adjusted depending on the value of the home during that time period. The amount of adjustment will keep the loan at 100% of the value, protecting the investor from losing out on any gains due to increasing home values.

It can all sound a little confusing, but this is good news for Bank of America (Countrywide) borrowers and their investors. If you have a loan with Bank of America (Countrywide), or any bank, that you are having difficulties paying, please contact your bank. I don’t want to sound like I am preaching, but I have seen too many people suffer when they didn’t need to. There are programs that can help you stay in your home and keep your credit from being severely damaged, but you have to reach out. Ignoring notices and phone calls from your lender will only get you into more problems. If you are honest with your lender and work with them, most problems can be worked out. If you’ve done all of that and still can’t afford to keep your home, there are other methods to avoid foreclosure, such as a short sale or deed-in-lieu. Of those two options, the short sale is almost always the better choice.

The first priority is to save your home, the second is to avoid foreclosure at all costs. So many borrowers are unaware of what a foreclosure means to their future. It’s almost as bad as having a felony on your record and it will haunt you forever. Please seek guidance if you are having problems keeping up with your payments. If you have any questions about your mortgage on your Port St. Lucie, Stuart, or Jensen Beach home, give me a call at (772) 335-5400, toll free: (800)-876-3535. You can also email me, or fill out this short information request form. I can provide you with information, links, and contacts to get you the help you need.

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Filed under: Avoiding Foreclosure • For Sellers • Loan modifications • Real Estate • Short Sales

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