Bank of America moves forward with principal reduction program for 200,000 homeowners

Bank of America announced it will be offering mortgage principal reduction to 200,000 underwater homeowners with loans owned or serviced by B of A this summer, according to CNBC. The program is part of the $25 billion settlement with federal and state agencies over the “robosigning” scandal. B of A will mail out the first 6,500 or so letters this week, continuing throughout the summer.

While all of the 200,000 individuals are eligible for the program, each borrower must still prove that they qualify. In addition to being underwater, borrowers must meet the following criteria:

• They must be 60 days late on their mortgage payment as of Jan. 31, 2012
• They must provide full documentation of income and demonstrate they can afford monthly payments under the modification
• They must show they are unable to afford their current monthly payment, which must equal more than 25 percent of gross income

If borrowers meet these criteria, Bank of America will reduce the monthly payment down to 25 percent of their gross income; this could equal savings of up to $150,000.

Bank executives don’t expect all 200,000 qualified borrowers to respond to the letters. Many have already received several notices or have gone through a failed mortgage modification process. Some simply may think the offer sounds too good to be true.

Since letters are being mailed on a staggered schedule throughout the summer, Bank of America also announced it will suspend foreclosure actions against the 200,000 selected homeowners until the process is complete.

To read the rest of the CNBC story, click here.