Bank of America Home Loans has begun reaching out to customers who may be eligible for forgiveness of a portion of the principal balance on their mortgage under terms of a recent settlement among five major banks, 49 state attorneys general, and the federal government.

The first letters in a targeted outreach to more than 200,000 potential candidates for this assistance are arriving in homes this week; most of the letters will be mailed by the third quarter of this year. The bank estimates average monthly savings of 30 percent on mortgage payments of customers who qualify for this program.

Bank of America began making principal reduction offers under the program guidelines in March, initially concentrating on homeowners who were already in the modification review process. So far under this early initiative, about 5,000 trial modification offers have been mailed, providing a potential total of more than $700 million in forgiven principal. Homeowners are required to make at least three timely payments before the modification can become permanent.

The wave of mailings beginning this week will reach a broader base of customers who may be eligible for this principal reduction program. The letters provide each homeowner with a description of the program and an invitation to provide financial information to begin the review process.

To be eligible for this program, a homeowner must meet certain criteria, including:

• Owes more on the mortgage than the property is worth today.
• Was at least 60 days behind on payments on January 31, 2012.
• Has 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.
• Has 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.

For further information on the settlement programs, Bank of America Home Loans customers may call (877) 488-7814.

Mercury News – In his State of the Union Address, President Obama laid out a plan to help responsible borrowers and support a housing market recovery.  Details of that plan were released yesterday.  However, funding for the proposed program must be approved by Congress, lowering the possibility that it will be implemented quickly. 

Making sense of the story

• Operated by the Federal Housing Administration, the plan would allow underwater homeowners to refinance into cheaper federally insured loans.  Borrowers with good credit who are current on their loan payments are eligible.
• The measure also streamlines the process of refinancing an underwater mortgage, eliminating the need for an appraisal or submitting a new tax return.
• To qualify, borrowers must be current on their mortgage, have a minimum credit score of 580, and must be refinancing a loan on a single-family owner-occupied principal residence.

   

• Lenders only need to confirm that the borrower is employed.  Loans that are more than 140 percent of the home value probably would not qualify until banks wrote down part of the balance.
• Congress must approve $5 billion to $10 billion in funding, leading housing experts to praise the plan’s objectives with skepticism of it passing this year.

Read the full story

Los Angeles Times – A total of 15,522 borrowers received permanent modifications through the Home Affordable Modification Program in August, up 2.3 percent from July.

Read the full story 

San Diego Union-Tribune – Bank of America has joined the Keep Your Home California principal-reduction program, making it the largest loan servicer involved in lowering loan balances for those with economic hardships.

Making sense of the story

• Keep Your Home California is a program offered through the California Housing Finance Agency to help struggling homeowners avoid foreclosure.
• Bank of America, which services more than two million home loans in California, joins others servicers involved in the program, including: California Dept. of Veterans Affairs, the California Housing Finance Agency, Community Trust/Self Help, GMAC, Guild Mortgage Company, and Vericrest Financial. Agency officials hope the list will continue to grow, and that the program will continue to gain momentum.
• Under the program, qualified homeowners may be eligible for up to $50,000 in assistance. The program requires the mortgage investor to match dollar-for-dollar the amount provided by the program.
• Bank of America borrowers who do not qualify for the principal-reduction program will be evaluated by bank representatives to explore other options, including a loan modification.
• To be eligible for the program, applicants must: Own and occupy their homes as their primary residence; not exceed $729,750 in current unpaid principal balances on first mortgages; meet low- and moderate-income limits; complete and sign a hardship affidavit to document reasons for hardships; have mortgage loans that are delinquent or “in imminent default;” and have enough income to pay modified mortgage payments according to guidelines from servicers participating in the programs.
• For more information about Keep Your Home California, visit keepyourhomecalifornia.org or call (888) 954-5337(KEEP).

San Diego Union Tribune – Three servicers are not making the grade in a federal program that modifies mortgages to help families stay in their homes, and starting this month, they will have their federal incentives withheld, says President Obama’s monthly “housing scorecard.”

Bank of America, J.P. Morgan Chase Bank and Wells Fargo Bank are “in need of substantial improvement” in the Making Home Affordable Program, or HAMP, which so far has permanently modified more than 600,000 mortgages. More than 10,000 of those were done in San Diego County, the scorecard shows.

Ocwen Loan Servicing also was pegged as needing substantial improvement, but the U.S. Treasury Department will not withhold incentives this quarter because the company’s marks were negatively affected by a portfolio acquisition that happened when the agency assessed servicers’ performances.

It’s possible the Treasury may permanently reduce incentives if the issues aren’t addressed “within a reasonable time,” the report says.

Issues ranged from errors in calculating homeowners’ incomes to ineffective reporting to the program, which is voluntary.

From Tim Massad, the acting treasury assistant secretary for financial stability:

While we continue to get tens of thousands of new homeowners into mortgage modifications each month, we need servicers to step up their performance to meet the needs of those still struggling,” said . “These assessments set a new benchmark by providing an unprecedented level of disclosure around servicer performance and will serve to keep the pressure on servicers to more effectively assist struggling families.

This is the first time the Obama Administration has included an assessment on servicers in the Making Home Affordable Program, which critics say is not meeting expectations. The government, which continues to defend the program, initially expected the program would help an estimated 3 million to 4 million people.

From now on, these reports will come quarterly and will highlight the program’s ten largest participants.