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BofA’s mortgage giveaway

By Polyana da Costa ·
Thursday, May 10, 2012
Posted: 12 pm ET

If your mortgage is owned by Bank of America, you may get a pleasant surprise in the mail in the next few days.

The bank has started reaching out to more than 200,000 borrowers who may be eligible to receive partial loan forgiveness. Those who qualify will save about 30 percent on their monthly mortgage payments.

The first letters have been mailed this week, the lender says.

So here is the fine print

To be eligible for this principal reduction program, a borrower must:

  • Owe more on the mortgage than the home is worth.
  • Have been at least 60 days behind on the mortgage payments, as of Jan. 31. (I don’t get it either but that's the rule.)
  • Have monthly housing expenses of more than 25 percent of gross household income. The expenses include mortgage principal payments, interest, property taxes, homeowners insurance and homeowner association fees.
  • Have a loan that is owned and serviced by Bank of America, or serviced for an investor who has given the bank the authority to do this type of modification.

Who's not eligible

If your mortgage is owned by Fannie Mae or Freddie Mac, you're not eligible. Why? Because the acting director of the agency that oversee the two entities, Edward DeMarco, says it shouldn’t be done.

Federal Housing Administration and Veterans Affairs loans are not eligible for this program.

Details on what you may be offered

Bank of America's initiative resulted from the recent $25 billion national mortgage settlement.

Bank of America says it will help "qualified underwater" borrowers by reducing their mortgage balance to as low as 100 percent of the home's value. Many of these borrowers owe significantly more than what their homes are worth. The lender will then modify the mortgage to reduce the interest rate to make the borrower's payment more affordable. If needed, the bank can offer additional payment forbearance on part of the principal.

But if the lender or the investor that owns your mortgage determines that it's more profitable to foreclose on your home than to offer you a loan modification, you may not get the deal.

According to Bank of America: "The settlement terms require a final calculation to determine that the cost incurred by the mortgage investor to modify the loan does not exceed the expected loss to the investor if it goes to foreclosure instead, commonly known as positive net present value."

Think taxes and credit

One more factor you should consider before accepting this or any other loan modification and loan forgiveness offer from any lender: How would this deal affect your taxes and credit score?

My story will walk you through some of the potential implications and questions you should ask before accepting these generous offers.

Follow me on Twitter @Polyanad.

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June 17, 2012 at 6:41 pm

Natfka...I too have a BofA loan of over 5% I always pay my bills on time. I have a Fannie Mae but they do not want to refinace low even though I want to drop from a 30 years (26 to go) to a 15 year. Im 63 and would like to pay for it before Im dead. They "giveaway" to people that do not stay true to their contracts but will not give me the lowest rate for always being on time. Life is strange.

June 15, 2012 at 3:26 am

Bank of America should have a better name for their products. "short arm loan".

June 14, 2012 at 3:38 pm

This is how BofA steals ur property. Sells it back to the govt. How do u think they paid back their stimulous so quick? If they really did. Just becuz the white house said so? ( I dont have a spelling problem its net spelling igit!!!)

June 14, 2012 at 12:18 pm

My house is also underwater - I probably owe twice what it is worth now. I struggle each month to keep current on my 1st and 2nd mortgage, the 2nd of which is with BofA. Because I have been deligent in not getting behind in my mortgage, which takes about half of my monthly pay, I am not elegible for any program either. I feel like I'm being penalized for being responsible, but I am thankful that at least for now I can make the payments. What are they thinking?

June 14, 2012 at 9:28 am

I asked for help from BOA and the representative laughed at me and said the government doesn't tell you not everyone qualifies for the help. All I wanted was a reduced interest rate but I am underwater. they will only refinance me from 6.25 if I come up with 40K in the difference of the property...What good is that? I am not late all I want is to reduce my interest rate and they won't do it. Does BOA prefer I walk away from my home...she said that is your decision not ours. She displayed no compassion what-so-ever.

Pierre is an idiot
June 13, 2012 at 5:06 pm

Pierre - what are you drinking?

BAC paid back all of TARP and the government profited from the investment. And its "overseas" not "oversees" - stop reading clown bloggers that make up facts and start thinking for yourself (after you learn how to spell words the rest of us learned in elementary school).

June 13, 2012 at 12:16 pm

BofA took the publics money and ran. Look at the banks historty!

They took some of the Tarp money and paid into a China program. After being caught they decided to sell their interest in that institution.

They took the public by way of FEES on the mortgages they financed, then sold the paper to PENSION funds that were part & parcel of the publics money.

They then went oversees when the American money went DRY and sold worthless paper to unsuspecting and stupid FINANCIAL INSTITUTIONS in Europe. Look what happened to the little country of ICELAND.

We must ROPE THESE THIEVES IN or they will bring the country down

June 12, 2012 at 5:24 pm

BS. Why is there such gray areas? Bof A is in bed with Obama. Not until he is out of office do I trust any company. They did that late for two months and you can qualify for the Obama refi. R I G HHHHHT. THAT alone caused my foreclosure. Once I did that, whop! they withdrew all the hoopla and foreclosed. how fair is that? B OF A has never been trustworthy. It was NOT the company I signed with in the beginning of my loan. it's a sham on Americans.

Veronica Burwewll
May 15, 2012 at 12:40 am

What do a person do when they are current on the morgt. and other bills, and now the 3 month savings are gone. No one or program thats out here is helping you modifi, or forberance is a option along with hamp? You want to cont. to live in you home cause you have invested 20 yrs. here, but there is no HELP, what do we do please someone help. We are both disabled too, no jobs set income family of 2 husb/wife. Is something out there for US? Out side of GOD?????We don't want to mes our great credit Up either it took to long to establih. Where do we go frm here.

May 11, 2012 at 11:52 pm

This is complete BS. Struggling to make ends meet, means that I have am current on my loan. So what they are saying is I should just stop paying them.

BofA holds my loan currently, if it was Fannie or Freddie I could get refinanced. This new giveaway does nothing to help me, and I have tried and tried through BofA to find a solution. There isn't one that I know of.

Anyone else have solutions?