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OR ENROLL NOW ONLINE FOR MORTGAGE ASSISTANCE AND THE NEW PRINCIPAL REDUCTION PLAN
2010 Principal Reduction Update
HOUSING PROGRAM ENHANCEMENTS OFFER ADDITIONAL
OPTIONS FOR STRUGGLING HOMEOWNERS
Refinements to Existing Administration Programs Designed to Help Unemployed,
Underwater Borrowers While Helping Administration Meet its Goals

WASHINGTON – Bank of America has announced it will make principal forgiveness– ahead of an interest rate reduction – the initial consideration toward modifying certain subprime, Pay-Option and prime two-year hybrid mortgages qualifying for its National Homeownership Retention Program (NHRP).

An interest rate reduction and other steps would then be considered, if additional savings are necessary to reach the 31 percent debt to income targeted payment.

Under the plan BOA will forgive up to 30 percent of the mortgage loan balance in two stages, but with a quid pro quo from the homeowner. 

The bank will offer an interest-free forbearance of up to 30 percent of the principal balance for five years.  If the homeowner stays current on mortgage payments for the period of time, then the amount will be forgiven.  On paper, at least, that forgiveness will allow the homeowner to return his loan to an LTV of 100 percent.

  • Home Affordable Modification Plan (HAMP) - Homeowner stability initiative: HAMP ; The housing plan calls for the government to invest $75 billion to provide incentives to mortgage lenders and qualifying homeowners to modify the terms of their loans through term-interest rate reduction (lower interest payments on their mortgages and longer periods of repayment) or principal reductions:
    • The Obama housing plan sets aside the $75 billion to help "responsible" homeowners avoid foreclosure.  Who will these money help?  In general, homeowners that are struggling (or are likely to struggle in the near future) to make their mortgage payments either because of a change in their situation (e.g. loss of income), or because the terms of their mortgages called for much higher monthly payments after an introductory period, as it was rather common in the sub-prime mortgage market. .

    • Home Affordable Refinance - Access to low-cost refinancing: to provide aid to qualifying homeowners so that they can access low-cost refinancing, the Obama's housing plan makes it possible for individuals to refinance their mortgages even if the equity in their property has fallen below "conforming loan" standards:
      The HASP helps homeowners who owe more than 80% of the value of their homes (i.e. their equity is less than 20%) secure lower monthly payments by refinancing their mortgages at the historical low rates available today (around 5.36% as of 7/15/09).
    • Home Equity Loan Modification (Second Lien Program) - Making Home Affordable: the housing plan was augmented to expedite modifications of first mortgages and to make it possible for homeowners that have home equity loans or other second liens on their properties to stay in their houses.  The HASP offers a Second Lien program that provides incentives for services to modify or extinguish second liens once a first mortgage has been modified:
       
    • FHA - Home Affordable Modification Plan (FHA-HAMP): FHA Homeowners who have Federal Housing Authority (FHA) insured loans are able to take advantage of the HAMP and modify their loans if they are 1 or more months late/delinquent in their payments.  Go to "FHA-Home Affordable Modification Plan" page for details of the plan.
      The government estimates that approximately 50% of all homeowners eligible for the housing plan's mortgage modification program have second liens (1 to 1.5 million).  By introducing incentives to modify those loans, the program is expected to help those homeowners reduce their payments even further, and to improve the chances that the mortgage modification program would work. 
    • Keeping Mortgage Rates Low: To maintain mortgage rates at historical low levels the housing plan calls for recapitalizing Fannie Mae and Freddie Mac with another $200 billion, and increase their ability to purchase conforming loans.  The HASP's goal of reducing mortgage rates is actively supported by the Federal Reserve through the purchase of conforming loan securities in the secondary markets: