Why are borrowers passing on free money?
Bank of America has been mailing letters to more than 200,000 homeowners, offering to forgive part of their mortgage balances, but few borrowers have responded to the offers.
No, this isn't charity. The loan forgiveness offers resulted from the National Mortgage Settlement agreement signed by some of the nation's largest lenders this year. They apply only to loans owned and serviced by Bank of America. Loans owned by Fannie Mae or Freddie Mac and serviced by Bank of America do not qualify.
Borrowers who respond and qualify are having their loan balances reduced by an average of $150,000 and their monthly payments reduced by 30 to 35 percent, says Ron Sturzenegger, a legacy assets servicing executive at Bank of America.
"What's the catch?" Sturzenegger was recently asked during a panel at the National Association of Real Estate Editors conference in Denver.
There really isn't one, he says. The offers may sound too good to be true, but they are legit.
The problem is that frustrated borrowers don’t believe that anything good will come out of it, says Marietta Rodriguez, director of national homeownership programs at NeighborWorks America.
Often, you'll find that many of these borrowers are frustrated by their unsuccessful attempts at working something out with their lenders. They are overwhelmed by scammers offering to help them with their mortgage issues. And they are afraid to open correspondence or answer the phone to talk to their lending institution when they haven't been able to pay their mortgages, she says.
There's an emotional wall between borrowers and these offers, she adds.
"There are a lot of exciting programs being rolled out," she says. "But it takes a very sophisticated borrower to understand them. They are very complex. That's why we encourage folks to reach out to a HUD-approved counselor."
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