Bank of America has sent out a first wave of letters to 200,000 customers who may qualify for principal reductions under the $25 billion settlement between federal and state officials and the largest five loan servicers.
The first letters are arriving this week, Bank of America said today in a statement. Most of the letters will be mailed by the third quarter of this year.
Bank of America estimates an average monthly savings of 30 percent on mortgage payments for customers who qualify for the program.
The nation’s second largest bank said it actually began making principal reduction offers under the settlement’s guidelines in March, initially focusing on homeowners who were already in a mortgage modification review process.
So far, about 5,000 trial modification offers have been mailed, providing a potential total of more than $700 million in forgiven principal, Bank of America said.
Homeowners are required to make at least three timely payments before the modification can become permanent.
“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,” said Ron Sturzenegger, Legacy Asset Servicing executive with Bank of America.
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.
Fannie Mae, Freddie Mac and the Federal Housing Administration (FHA) are not participating in the principal reduction program, “but other modification programs which may provide comparable reductions in monthly payments are available on those loans.”