According to Forbes, Bank of America is about to begin sending out its first round of loan modification offers. This first round of offers begins BofA's compliance with the foreclosure fraud settlement. How consumer-friendly these offers will be remains to be seen.
According to BofA, more than 200,0000 Americans will receive principal reduction offers. The bank is also stating that the offers will, on average, reduce mortgage payments by 30%.
In order to be considered eligible for the modification, borrowers must:
- Owe more on the mortgage than the property is worth today.
- Have been at least 60 days behind on payments on January 31, 2012.
- Have a contractual monthly payment for principal, interest, property taxes, hazard insurance and any applicable homeowner association fees totaling more than 25 percent of gross household income.
- Have a loan that is owned and serviced by Bank of America, or serviced for another investor that has given the bank delegated authority to do such modifications.
At least for the short term, those of you with Bank of America mortgages may want to keep an eye on your mail. If you have received an offer letter from Bank of America, let me know. I would love to see what is being sent.
Here are the missing details so far:
- Are these letters simply an offer to begin submitting and re-submitting financial paperwork? Basically, are we going to see more of the same behavior we've always seen?
- Do most, if not all, of these principal reductions put the house at 0 equity or positive equity? If not, how far underwater will borrowers remain?
- If the modifications do not restore or zero out equity, how long will it take to regain equity based on the new, reduced payment?
- Are borrowers forced to accept the account balance as-is or is there room to contest bogus charges and fees assessed by servicers?
Without answers to these questions, I cannot assess whether these efforts will have any large-scale impact. While I am sure that, on an individual basis, some of these deals may be exactly what a particular borrower wants, I refuse to be enthusiastic without more data.
Please consider this a call for more data. Let us know if you received a letter from BofA.
For those of you who move forward with the BofA modification process, be sure to have an attorney review any offer before accepting it. You never know what may be hidden in the agreement.