Bank of America Offers Bailout

Change happens at the speed of thought. Is your mind in drive, neutral, reverse–or park? Is it time to shift your thinking?If you have a mortgage with Bank of America, and you owe more on your loan than your home is now worth, some relief could be on the way. Bank of America has announced plans to extend about $3 billion in loan forgiveness to 45,000 homeowners who are in dire straits. This is an enhancement to its National Homeownership Retention program, which was launched in 2008 to help borrowers stay in their homes by offering loan modification. The changes are also in response to a legal settlement between 43 state attorneys general and Bank of America subsidiary Countrywide Financial Corp. The deal was brokered by Massachusetts Attorney General Martha Coakley in March of this year and was in effect by mid-May. After acquiring Countrywide, Bank of America took on the task of completing the modification of many of the subprime mortgages doled out by its new subsidiary.

Under the plan, Bank of America will provide “earned principal forgiveness” of up to 30% to homeowners who owe more than 120% of their home’s value and are 60 or more days behind on payments. Borrowers who meet the eligibility requirements of the National Homeownership Retention program as well as the Making Home Affordable loan modification program will be able to take advantage of this plan. The bank says it is offering the principal forgiveness as a way to encourage burdened borrowers to participate in loan modification programs.

However, those with 30-year fixed rate loans are not eligible. Bank of America says it aims to assist those borrowers with loans that often exhibit a high rate of missed payments such as the payment-option Adjustable Rate Mortgage. This is an ARM that lets you choose among different payment options each month. For example, one month you can elect to choose interest-only payments, and another month you can choose limited or minimum payments, which allows you to pay less than the minimum. Consequently, borrowers with these types of loans often end up owing more money.

If you don’t qualify for a loan modification but you’re having difficulty paying your mortgage, you still have some options.

Consider a short sale.
Relief might come from a short sale, which is when you sell your house and the lender agrees to accept less than the agreed upon payoff amount. Although not encouraged because of the impact on your credit score and future ability to get a mortgage, it’s a last resort if you’re in over your head. If you proceed with a short sale, you can expect to see your credit score drop by 200 to 300 points.

Get help.
Seek assistance from a nonprofit housing counseling agency that has been approved by the U.S. Department of Housing and Urban Development (HUD). Free services can be obtained from housing advocates such as Neighborhood Assistance Corporation of America (NACA).    –Sheiresa Ngo