Here’s the Bank of America loan modification question…

Keep in mind Bank of America bought Countrywide just prior to us receiving this question from a vistior.

“I have 2 mortgages right now. The first is a fixed 30 year loan for $442,500 @ 6.5% ($2754/Mo.) with Countrywide, and the second which is killing me is $132,500.00 @12% ($1466/Mo.) with HSBC - figures are pretty close I believe.

I know Countrywide as of today is helping people with mortgages that are behind, and offering to reset to the value of the home.

My question is, Is this real? If it is, could I get HSBC to do the same? Would Countrywide be able to take over the HSBC part, or should I try and just get away from Countrywide all together?

My wife and I have had job issues the past couple years and have been barely hanging on, but are doing much better. Our credit has suffered and we’re wondering if they would even entertain helping us at this point. Any information would be greatly appreciated.”

My Answer For Those Seeking a Bank of America Loan Mod:

Bank of America announced earlier this month their new loan modification program which came out of a settlement from many State Attorney Generals who sued Countrywide Home Loans for predatory lending practices. Since BofA bought Countrywide Home Loans back in July of this year, it’s now become their problem.

Here’s some interesting quotes from the press release,

“We are confident that together with the Attorneys General we have developed a comprehensive program that provides more solutions than ever before to assist troubled borrowers and put them back on the path to sustained home ownership,” said Barbara Desoer, president, Bank of America Mortgage, Home Equity and Insurance Services. “Since acquiring Countrywide in July, we have committed significant resources and developed innovative programs to help as many Countrywide customers as possible stay in their homes.”

The release outlines those eligible as…

“Various options will be considered for eligible customers to ensure modifications are affordable and sustainable. First-year payments of principal, interest, taxes and insurance will be targeted to equate to 34 percent of the borrower’s income. Modified loans feature limited step-rate interest rate adjustments to ensure annual principal and interest payments increase at levels with minimal risk of payment shock and re-default. Modification options include, among others:

- FHA refinancing under the HOPE for Homeowners Program;

- Interest rate reductions, which may be granted automatically through streamlined processing; and

- Principal reductions on Pay Option adjustable rate mortgages that restore lost equity for certain borrowers.

The program applies to eligible mortgage loan customers serviced by Countrywide and who occupy the home as their primary residence. Under the national program, Countrywide will not charge eligible borrowers loan modification fees, and Countrywide will waive prepayment penalties for subprime and pay option ARM loans that it or its affiliates own. Some loan modifications will be subject to compliance with servicing contracts and some will require investor approval.”

My thoughts are these..

1. FHA Hope Now is a untested.
3. Even if these programs could help you…and you could get them to act…your second poses a roadblock to any solution that requires a refinance instead of a loan modification.

With that said, you should contact BofA/Countrywide on the December 1 launch date and see what’s needed if you qualify…and get that process started. Possibly a simple reduction in balance or rate and payment adjustment would help out and that’s nothing your second can stop. Hopefully you can get that…without attempting any refinance. Refinancing is where the seceond can cause problems since you probably don’t have enough equity to pay them off even if you got a significant principal reduction from BofA.

Only time will tell if BofA is serious about helping homeowners stay in their homes or if they are simply going to put on a show and do the minimum required to comply with the settlement. Here’s a link to my review of BofA called Bank of America Mortgage Review…take a look.

Thanks for the question,

Good Luck!

UPDATE 10/23/2008:It is now being reported a lawyer from the firm, Grais Ellsworth LLP published a letter informing the investors in Countrywide/Bank of America’s mortgaged-backed securities, of the lawsuit they could pursue if any of these loans were allowed to be modified. The legal issues to me are not all that relevant, but the idea consumers need to know is…even if lenders wanted to modify loans and keep folks in their homes…they can’t without exposing themselves to investor lawsuits.

UPDATE 3/25/2010:The is reporting a program by Bank of America to help “underwater” home owners who are behind on their mortgage by creating a loan modification that includes principal reduction. This announcement comes one day before a new Obama administration initiative giving unemployed foreclosure victims some relief and will may include a principal reduction component as well.

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