Posts Tagged ‘principle reductions’

Bank of America Launches Its Earned Principle Reduction Program Under HAMP

Bank of America has started its program to reduce principle balances on some of the loans it services as part of  it’s participation in HAMP. 

The way it will work is that Bank of America would use principle reduction, ahead of interest rate reductions and term extensions, in order to bring the borrowers’ payments to 31% of their verified income.  The amount of principle reduced will be foreborn in an non-interest bearing account, and as the homeowner makes timely payments on his modified mortgage, he will earn forgiveness of the forebeared principle.

As of this writing, loans that are eligible for this earned principle reduction program are Pay-Option ARMs and two year hybrid ARMs originated by Countrywide before January 2009. The amount owed must exceed 20% of the property value and the mortgage must be 60 days or more delinquent.

Treasury has announced that it will implement a similar idea for HAMP later this year so that it may benefit a wider range of homeowners.

Strategic Defaults May Force Lenders and Servicers To Modify Loans, Including Principle Reductions

The writing is on the wall. Many people across the United States have decided that it just doesn’t make an ounce of economic sense to continue paying on a mortgage when the underlying asset isn’t worth half of what they owe on paper. A lot of these folks could afford to continue to make payments, but they’re deciding its just not worth it. 

In a May 3rd article on the Freddie Mac site,  Executive Vice President Don Bisenius implores people to continue paying on their mortgage if they can afford to do so. He claims that people walking away from their homes harms communities and further brings down property values.  Mandelman Matters already tears this guy a new one, so I won’t go that route, but I do believe that the banksters might be running a little scared these days.

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