Earlier this year, federal and state officials announced a national-level agreement between the federal government and 49 state attorneys general and several large mortgage servicers to address mortgage loan and foreclosure abuses. The servicers included Bank of America, JP Morgan Chase, Wells Fargo, Citigroup, and Ally Financial. The final deal emerged out of a series of negotiations between the financial servicers and government officials, resulting in a total settlement of $25 billion.
Bank of America is now taking an additional step toward acknowledging its role in the foreclosure crisis, reports the Los Angeles Times. The bank intends to reduce by about $100,000 the amount owed on as many as 200,000 underwater mortgages. The promise is part of a $1-billion “side deal” to the earlier $25-billion foreclosure settlement. (To read more about the original $25 billion settlement, see our prior post here.) Our Oak Park foreclosure defense lawyers know this deal could provide important financial relief to struggling homeowners. According to a Bank of America spokesman, the principal reductions could eliminate the entire underwater portion of some mortgages, with the average reduction projected to be approximately $100,000.
A mortgage is deemed “underwater” when the amount owed on the mortgage exceeds the value of the home. Typically, however, a homeowner’s concerns do not stop there. Once a mortgage is underwater not only is the homeowner paying for a house that has lost significant value, but also he or she may fall behind on the mortgage, which generally results in hefty penalties and fees.
This “side deal,” while potentially helpful to a number of homeowners, is also self-serving. By reducing the amount owed on its mortgages, Bank of America could cut significantly the amount of penalties it owes due to the settlement. In fact, the $3.25 billion the organization faces in penalties could be reduced by approximately $850 million.
If you are a homeowner whose loan was serviced by Bank of America and you were at least 60 days delinquent on your mortgage as of January 31st, you may be eligible for an underwater mortgage reduction. However, only loans serviced by the bank or private investors are eligible for the program. That does include loans serviced by Countrywide Financial Corporation (“Countrywide”), the sub-prime lender that Bank of America purchased in 2008 and which led to many of the company’s woes due to the number of “troubled” loans Countrywide brought with it. Unfortunately, loans owned or backed Fannie Mae, Freddie Mac, the Federal Housing Administration, or the Veterans Administration are not eligible for the principal reduction program.
According to Bank of America, about 200,000 homeowners will be eligible for the principal reduction program. If you are a Chicago homeowner and you think you may be eligible, you can call 877-488-7814 for more information.
Those of us working in Oak Park foreclosure law know that no one wants to lose their home. We also know there is no shame in asking for help. Our attorneys are here to listen to your questions and concerns and will do our best to explain all of the legal options available to you.
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