Up until now, an underwater homeowner’s only options for modifying their loan included interest rate reduction and suspended or lowered monthly payments, usually with the unpaid principal being added to the loan balance. Bank of America recently unveiled the mortgage industry’s first large-scale principal forgiveness program, potentially involving up to 45,000 underwater borrowers and $3 billion in debt write-offs. The initiative will involve certain subprime and option ARM loans as well as loans that were fixed for the first two years and then adjusted annually. B of A says the program may be expanded to include other types of loans. Borrowers could receive a waiver of up to 30% of the principal balance earned over 5 years as long as the borrower keeps up with their modified loan payments. Eligible borrowers must be 60 days late on their payments, along with meeting other requirements.
Learn more at Bank of America’s website: Principal Forgiveness Loan Modification