Reducing Principal will help Reduce Foreclosures

People who face losing their home in foreclosure often ask, "If the bank is going to lose all this money by selling my home at fair marketvalue, why can't they re-work my loan at that same price? I could makethe payment if they would simply reduce my loan balance to fair marketvalue." In effect, that is exactly what Bank of America is proposingto do.

Not all of the details are out, but the press release came out today stating that people who owe more than 120% of the fair market value oftheir home could qualify to have the principal reduced to 100% of fairmarket value over a 5 year period. Let's say you have a home that isworth $100,000, but you owe Bank of America $125,000. If you qualifyfor the program your loan balance would be instantly knocked down to$100,000. The $25,000 debt would still exist, but you won't pay anyinterest on that debt, and it will be forgiven in stages over a 5 yearperiod. At the end of five years all you will have is the $100,000loan. But if you miss a payment or go into foreclosure the unforgivenportion of the $25,000 will probably be there waiting for you.

You can read the entire press release here: ShorsalevsforeclosureNC - Link to Article.