Bank of America began mailing out more than 200,000 letters this week targeting borrowers thought to be eligible for principal-reducing modifications under terms of the recent settlement the company and four other servicers reached with the federal government and 49 state attorneys general.
To be eligible, a homeowner must owe more on the mortgage than the property
is worth today and must have been at least 60 days behind on payments on January 31, 2012.
In addition, the homeowner’s monthly housing costs must be more than 25 percent of gross household income, and the loan must be owned and serviced by Bank of America or serviced for another investor that has authorized the bank to grant principal writedowns.
Officials at Bank of America estimate average monthly savings of 30 percent for customers who qualify for the program
The North Carolina-based lender said Tuesday that it has already extended about 5,000 trial modification offers involving principal reductions since March, with a potential total of more than $700 million in forgiven mortgage debt. Homeowners are required to make at least three timely trial payments before the modification can be made permanent.
“Building on home retention and payment assistance programs already in place, we are meeting our obligation to deliver this additional relief to our customers following the completion of the recent global mortgage settlement,” said Ron Sturzenegger, Bank of America’s executive over legacy asset servicing.
“To the extent principal reduction and other modification tools help us turn mortgages headed for possible foreclosure into long-term performing loans, it will be positive for homeowners, mortgage investors, and communities,” Sturzenegger added.
The first letters of Bank of America’s mail blitz should start landing in mailboxes this week with the majority of the 200,000-plus identified candidates receiving notice by the third quarter of this year.
Bank of America has committed to slashing $11 billion in mortgage debt for struggling homeowners as part of the settlement agreement reached. But with BofA expecting an average principal reduction of $150,000 for each borrower, crude estimates put the tab potentially as high as $28 billion to $30 billion if a large majority of those targeted respond to the company’s outreach efforts and satisfy the qualifying criteria.
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