This is from the Florida Association of Realtors(R) newsletter:
.........Banks have resisted a push to reduce principal owed by homeowners behind on their payments. One concern is that borrowers in good standing will stop making payments in order to lower their balances.
Bank of America has offered to reduce principal for loans in its own portfolio and for those the bank services for private investors, the person said. Loans owned by government-controlled mortgage giants Fannie Mae and Freddie Mac would not be eligible.
Of the 14 million loans serviced by Bank of America, half are owned by Fannie and Freddie. One-quarter are owned by the bank, and another quarter by private investors. Borrowers with a balance of $1 million or less and who live in their homes would be eligible. The homeowner’s monthly mortgage debt would have to be equal to 25 percent or more of their monthly income.
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Comments
I have personally seen Principal reduction on first lien mods, only twice. (principal forbearance or principal freeze, many times, but its not forgiveness)
Number 1, -as we all known..- it was Wachovia, discounting @ 4% of principal forgiveness, and Number 2 was Litton Loan thorught the HAMP, doing somthing that I think is fantastic: They still provided principal forbearance (or rat trap, as I call it) but that amount can be completely wiped out in a period of 3 years, if borrower pays on time. So they froze $97,000 and each year thereafter (if borrower complies) they will erase 32,000. Its a great idea, and a great start.
She will only owe @ 120K there after. Client was on Tucson Arizona.
Regarding BOFA, I rather go to lunch and say nothing...