Those principal reductions are much
deeper than the ones originally announced as part of the robo-signing settlement deal.
When the settlement was first
announced, the average principal reduction was expected to reduce mortgage
balances by an average of about $20,000. Among the five biggest lenders, the
reductions are expected to help roughly 1 million homeowners who owe more on
their homes than they are worth.
The other four banks, JPMorgan Chase
Citigroup, Wells Fargo and Ally Financial, are expected to
reduce qualified borrowers' principal to between 115% and 125% of the value of
their homes. Bank of America, meanwhile, is aiming to reduce the amount owed on
a home to 100% match the current market value.
Bank of America's deal only applies to the
mortgages it owns and some that it services for private investors. Loans backed
by government-controlled agencies like Fannie
and Freddie
or insured by the Federal Housing Administration are not
eligible for the program.
Many of the mortgages Bank of
America plans to refinance came to the bank through its 2008 acquisition of
Countrywide Financial, which issued many high value loans called jumbo
mortgages that exceeded the loan limits of Fannie Mae
and Freddie
Mac. A large percentage of those loans were issued in some of the
country's hardest hit housing markets, including California, leaving many of
Bank of America's mortgage borrower's deeply underwater on their mortgages,
said Simon.
The bank has already identified the
200,000 or so borrowers that it will offer modifications to and will start to
reach out to them as soon as a D.C. federal court approves the settlement.
There are incentives to do that. If
the bank is able to demonstrate that it faithfully carried out the provisions
of the attorneys general's foreclosure settlement -- as well as a separate
settlement in which it agreed to reimburse HUD $1 billion to cover problems
originating FHA loans -- over the next three years, it can be
forgiven $850 million in penalty payments, said Simon.
The bank has also agreed not to
pursue foreclosures against any delinquent borrowers who might be eligible for
a mortgage modification as part of the settlement. It will also reform its
foreclosure processing to avoid repeating robo-signing abuses, in which bank
employees signed hundreds of documents a day, testifying to
statements they had no knowledge of.
The deal is one of a series of
government-led initiatives aimed at tackling the foreclosure crisis. The latest
effort came on Tuesday when the Obama administration announced a plan to
reduce refinancing costs for FHA-insured loans.
The U.S. Department of Housing and
Urban Development (HUD) advises borrowers who believe they were subjected to
foreclosure abuse and may be eligible for a mortgage modification under the
settlement to call their servicers and ask for a review of their cases.
HUD said once the agreement was
submitted to a court for approval, which was expected to happen on Friday, it
would hold a press conference to go over the details.
To get a better idea of when your West
Sacramento home will be worth what you owe, log in to www.shortsaleandloanmod.info
for a free estimate or call me today for a free no obligation consultation.
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