If you get a letter from Bank of America offering to eliminate the second mortgage on your home, don't laugh. It's not a joke. The bank is in the process of mailing letters to 150,000 homeowners, offering to wipe out their second mortgages.
Homeowners who want to accept the loan forgiveness don't need to reply to the letter. The loan will be automatically forgiven, unless the homeowner contacts the bank to reject the offer within 30 days of receiving the letter.
It sounds too good to be true, but the lender says eligible homeowners will have their second mortgages eliminated and reported to the credit bureaus as "paid and closed."
This offer is a result of the National Mortgage Settlement signed this year. The bank says it has eliminated the second mortgage of more than 50,000 homeowners as of August 21, totaling $5.8 billion in debt relief. That translates into an average of $116,000 in forgiven debt per homeowner.
To be considered for the program, your second mortgage must be owned and serviced by Bank of America. You may qualify even if your first loan is not owned by the bank. The majority of mortgages eligible for the program are in default, according to Bank of America.
Only borrowers who receive the letter from Bank of America via FedEx or certified mail are eligible for the loan forgiveness.
Lenders have to report forgiven debt to the Internal Revenue Service. You must report the amount forgiven to the IRS when you file your taxes. As long as the loan forgiveness is completed by the end of the year, you may claim a tax exemption under the Mortgage Forgiveness Debt Relief Act -- if the loan is backed by your primary home and the loan was used to purchase or make improvements to the home. The exemption is set to expire Dec. 31. Unless Congress extends the law, any debt forgiven in 2013 will be taxed as income.
Have you received a loan forgiveness letter from Bank of America? I'd love to hear from you.
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