Update – Homeowners who have Bank of America as their lender may get a big surprise in the mail soon… An offer to reduce their principal mortgage balance by as much as $150,000!

In a recent settlement with the with state attorneys general and the U.S. Department of Justice,  Bank of America committed over $11 billion to reducing principal balances via their principal reduction program.

Here is what you need to know if you have B of A as your lender:

This program is real! Do not discard your letter if you get one, you will not be eligible anymore if you do.  The letters are being sent via certified mail and are clearly from B of A, unlike the advertisements you may have received from companies if you were late on your mortgage payments.

This brings up another good point, the letters are going out to homeowners who are 60 days or more late on their mortgage payments.  The reductions are said to reduce payments by up to 35%, so this is a targeted effort to help those homeowners who have tried other options and they simply have not worked.

In addition to being late on your mortgage, homeowners also need to have an income.  You have to be able to show you can afford the new mortgage payment if your balance is reduced.

Borrowers homes also have to be “underwater” to qualify.  This simply means your home would have to be worth less than you owe on your mortgage, which is very common for many homes purchased in the last several years.

Here’s the deal – 200,000 letters are being mailed out to various homeowners who Bank of America determines qualify (by using a net present value test to determine if the reduction of principal will save over foreclosure for investors).  This means you have to just sit back and wait for your letter to arrive, right?  Maybe not?  BestMortgageLoanModification.com says “Many borrowers don’t realize you can call certain departments from B of A and determine if you are eligible for the principal reduction program rather than waiting for a letter to arrive.  We have had instances where a borrower calls us looking for a HARP refinance and we see they have lates, which makes them ineligible for the program.  We have directed the borrowers to call B of A directly and inquire about the reduction program, which has resulted in some borrowers receiving confirmation over the phone that they do in fact qualify. They are ecstatic when this happens!”

If you meet the criteria above and would like to see if you qualify for the program,  why not give B of A a call and see if you are a candidate?  The worst that can happen is they say “no”, while on  the other hand you may be able to get a principal reduction up to $150,000!

While this deal was part of a settlement, B of A has stated that they will reduce more than the $11 billion dollars in mortgages if more people respond to the letters than expected.  This is a wonderful opportunity for homeowners who are struggling to make their payments.  Time will tell if other lenders will jump on board and begin to offer reductions on their own without legal action, but if this program is a success it may very well happen much more than it currently does.

End update

Principal reduction programs are a highly sought after option for homeowners who find themselves in an “upside down mortgage.”  There are a lot of scared and frustrated homeowners doing everything they can to keep their homes. Read More…