Forbes, Bank of America is about to begin sending out its first round of loan
modification offers. This first round of offers begins BofA's compliance
with the foreclosure fraud settlement. How consumer-friendly these offers
will be remains to be seen.
According to BofA, more than 200,0000 Americans will receive principal
reduction offers. The bank is also stating that the offers will, on average,
reduce mortgage payments by 30%.
In order to be considered eligible for the modification, borrowers must:
- Owe more on the mortgage than the property is worth today.
- Have been at least 60 days behind on payments on January 31, 2012.
- Have a contractual monthly payment for principal, interest, property taxes,
hazard insurance and any applicable homeowner association fees totaling
more than 25 percent of gross household income.
- Have a loan that is owned and serviced by Bank of America, or serviced
for another investor that has given the bank delegated authority to do
At least for the short term, those of you with Bank of America mortgages
may want to keep an eye on your mail. If you have received an offer letter
from Bank of America, let me know. I would love to see what is being sent.
Here are the missing details so far:
- Are these letters simply an offer to begin submitting and re-submitting
financial paperwork? Basically, are we going to see more of the same behavior
we've always seen?
- Do most, if not all, of these principal reductions put the house at 0 equity
or positive equity? If not, how far underwater will borrowers remain?
- If the modifications do not restore or zero out equity, how long will it
take to regain equity based on the new, reduced payment?
- Are borrowers forced to accept the account balance as-is or is there room
to contest bogus charges and fees assessed by servicers?
Without answers to these questions, I cannot assess whether these efforts
will have any large-scale impact. While I am sure that, on an individual
basis, some of these deals may be exactly what a particular borrower wants,
I refuse to be enthusiastic without more data.
Please consider this a call for more data. Let us know if you received
a letter from BofA.
For those of you who move forward with the BofA modification process, be
sure to have an attorney review any offer before accepting it. You never
know what may be hidden in the agreement.