Bank of America Reduces Mortgages by Forgiving a Portion of the Principal.
For those of you who have not heard the breaking news, Bank of America has begun to forgive a portion of the principal on certain people’s mortgages. The NYT is reporting that “Bank of America has started sending letters to thousands of homeowners in the United States, offering to forgive a portion of the principal balance on their mortgages by an average of $150,000 each.” In a press release announcing the new practice, Bank of America claims to have developed this program under the terms of a settlement involving five major banks, the Federal Government, and 49 state attorneys general. This may mean that other banks will begin taking similar actions in the near future, but that remains to be seen.
In some instances, the reduced principal could end up lowering mortgage payments by approximately 30%. By forgiving a portion of the principle and lowering monthly payments, Bank of America is able to turn mortgages that would otherwise default into long-term performing mortgages. At the same time, this will allow many individuals to remain in their homes. Bank of America will be contacting about 200,000 potential candidates.
If you have any questions about mortgages, feel free to contact The Law Firm of Vaughn and Weber at (516) 858-2620 to speak with a foreclosure attorney. We would be happy to speak with you about this or other mortgage issues.
The May 7, 2012 New York Times article by Natasha Singer can be accessed by clicking here.