Loan Modification

Foreclosures Avoided By Forgiving Principal?

By Kurt O'Keefe, Detroit Consumer Attorney

Bank of America becomes the first mortgage company to SAY it will begin forgiving principal owed on mortgages to help homeowners avoid foreclosure.

The program does not begin until May.

You must have missed at least two payments, and, qualify under the HAMP program guidelines.

In one of the dumber decisions ever made, Bank of (everything in) America bought Countrywide, the #1 offender in issuing bad mortgages, just before the house of cards began to collapse in 2008.

How much of the principal balance will they forgive?

Up to 30%, if your home is at least 20% underwater.

That means, that your mortgage debt is 120% of the value of your home.

Bank of (everything in) America guesses 45,000 will qualify.

My guess is much higher.

Not clear how they will come up with a value for your home.

Once you get the modification, you have to make all the payments to get the reduction in the principal balance.

This is not done out of the goodness of the heart, forgive the term, of Bank of (everything in) America.

A bunch of states sued Countrywide for its evil deeds, and this is the latest deal to resolve those suits.

Of course, the bloggers on this site have been screaming for judicial mortgage modification, changing the law to allow bankruptcy judges to re-write first mortgages in Chapter 13 cases.

The mortgage companies headed off that reform by telling the politicians, “Don’t worry. Trust us.  We will make voluntary changes to fix the foreclosure crisis.”

The Obama administration came up with HAMP instead of pushing for bankruptcy law reform.

So far, HAMP is a failure.

We shall see how Bank of (everything in) America follows through, and whether any of its partners in crime follow suit.

Surprisingly enough, Bank of America stock rose on the news.

Foreclosures Avoided?

Related posts:

1. How Can I Figure My Mortgage Principal and Interest
2. Foreclosures Headed Up?
3. Who Are The 100,000 Homeowners Who Got A Loan Modification Through BOA?

Full post as published by Mortgage Law Network on May 07, 2010 (boomark / email).