Ever since this “mortgage meltdown” many of us in the business have been of the mindset that the only TRUE loan modification program that would make a difference MUST include a PRINCIPAL BALANCE REDUCTION!
This has now been proven to be true as a great number of loan modifications that have been granted in the last year or two are back in foreclosure. Stretching out the term to 40+ years and giving a “teaser” rate for the first couple of years is a joke!
Well..it seems that the great and mighty Bank of America is dipping their toe in and testing the waters. But WAIT…don’t call them…they will call you. WHAT? Yes…the program is so specific that only a REALLY small percentage of loans will be considered for this modification.
Here are some details:
- Invitation only: don’t call your local BofA banker and expect him to lop off tens of thousands of dollars from the loan. The bank will contact you if you qualify
- The program is for Countrywide borrowers
- Loan balance must be at least 120% of the estimated home value
- Borrower must be at least 60 days overdue
- Borrower must demonstrate financial hardship
Risky loans eligible for the program include:
- Sub-prime loans
- "Option adjustable-rate" — the ones with low teaser payments that adjust higher
- Some loans that have a fixed rate for two years and then adjust annually
The bank estimates that perhaps 45,000 customers will qualify for principal reductions that will average approximately $60,000. BofA currently holds 1.2 million loans that are in default.
Even if we might see this as “too little too late”…we can only hope that other lenders will follow suit and offer similar (or hopefully BETTER) programs.