Tag: unpaid principal balance

Bank of America Forgiving Second Mortgages

On October 1, 2012, in Foreclosure, by Robbie L. Vaughn, Esq.

Bank of America Forgiving Second Mortgages

BOA eliminates the full unpaid principal balance on some second mortgages.

Bank of America recently announced that it will be forgiving 2nd mortgages, for some homeowners,  “under Bank of America’s participation in the 2012 national mortgage settlement.” We will be writing more about the 25 billion dollar National Mortgage Settlement soon, but, for now, here is part of BOA’s recent press release:

As part of Bank of America’s ongoing efforts to help customers in need of mortgage assistance, this company is in the process of mailing approximately 150,000 letters to pre-qualified homeowners offering automatic extinguishment of their second lien mortgages. The intention of the program is to place homeowners in an improved financial situation by reducing their monthly debt obligations and, potentially, help them create equity in their property.

The full forgiveness of second lien balances on eligible loans is being extended under Bank of America’s participation in the 2012 national mortgage settlement among the five largest mortgage servicers, 49 state attorneys general and the federal government.

Letters that began mailing in July 2012 and continue through the end of this year inform predetermined eligible homeowners that the full balance of their Bank of America-owned and -serviced second lien mortgage will be forgiven and the bank’s lien on the collateral property will be released free and clear, unless the customer opts out of this relief offer within 30 days of receiving the letter.

Our take: We like it! There could be tax consequences, but we doubt that would be reason enough to opt out. It would be wise to speak with a CPA.

Foreclosure Attorneys in Mineola

If you have any questions about this or other legal issues, call The Law Firm of Vaughn, Weber & Prakope, PLLC today, at 516-858-2620, for a free consultation!

This is not Tax or Legal advice!

News: FHA to Refinance “Underwater” Homeowners

On August 9, 2010, in Foreclosure, Message/News Board, by Robbie L. Vaughn, Esq.

FHA LAUNCHES SHORT REFI OPPORTUNITY FOR UNDERWATER HOMEOWNERS
Effort designed to encourage principal write-downs for responsible borrowers

WASHINGTON – In an effort to help responsible homeowners who owe more on their mortgage than the value of their property, the U.S. Department of Housing and Urban Development today provided details on the adjustment to its refinance program which was announced earlier this year that will enable lenders to provide additional refinancing options to homeowners who owe more than their home is worth. Starting September 7, 2010, the Federal Housing Administration (FHA) will offer certain ‘underwater’ non-FHA borrowers who are current on their existing mortgage and whose lenders agree to write off at least ten percent of the unpaid principal balance of the first mortgage, the opportunity to qualify for a new FHA-insured mortgage.

The FHA Short Refinance option is targeted to help people who owe more on their mortgage than their home is worth – or ‘underwater’ – because their local markets saw large declines in home values. Originally announced in March, these changes and other programs that have been put in place will help the Administration meet its goal of stabilizing housing markets by offering a second chance to up to 3 to 4 million struggling homeowners through the end of 2012.

“We’re throwing a life line out to those families who are current on their mortgage and are experiencing financial hardships because property values in their community have declined,” said FHA Commissioner David H. Stevens. “This is another tool to help overcome the negative equity problem facing many responsible homeowners who are looking to refinance into a safer, more secure mortgage product.”

Today, FHA published a mortgagee letter to provide guidance to lenders on how to implement this new enhancement. Participation in FHA’s refinance program is voluntary and requires the consent of all lien holders. To be eligible for a new loan, the homeowner must owe more on their mortgage than their home is worth and be current on their existing mortgage. The homeowner must qualify for the new loan under standard FHA underwriting requirements and have a credit score equal to or greater than 500. The property must be the homeowner’s primary residence. And the borrower’s existing first lien holder must agree to write off at least 10% of their unpaid principal balance, bringing that borrower’s combined loan-to-value ratio to no greater than 115%.

In addition, the existing loan to be refinanced must not be an FHA-insured loan, and the refinanced FHA-insured first mortgage must have a loan-to-value ratio of no more than 97.75 percent. Interested homeowners should contact their lenders to determine if they are eligible and whether the lender agrees the write down a portion of the unpaid principal.

To facilitate the refinancing of new FHA-insured loans under this program, the U.S. Department of Treasury will provide incentives to existing second lien holders who agree to full or partial extinguishment of the liens. To be eligible, servicers must execute a Servicer Participation Agreement (SPA) with Fannie Mae, in its capacity as financial agent for the United States, on or before October 3, 2010.

For more information on FHA Short Refinance option, read FHA’s mortgagee letter.

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