Bank of America Corp. released it's plans to erase as much as $3 Billion in "principal" owed by thousands of severely delinquent borrowers who owe more than their homes are worth. BofA which states will take priority, however California will be the largest block. These delinquent loans came from Bank of America's acquisition of Countrywide Financial Corp. Bank of America said it will be contact those borrowers they deem eligible for the program. The program is aimed to reduce first mortgage payments to 31% of gross household income and targeted to holders of troublesome loans, such as Option ARMs, which are adjustable rate mortgages for which borrowers had the option of making payments that did not cover the interest costs for 5 to 10 years. Here are some of the key factors of the program:
- Borrowers must demonstrate a hardship in making current payments, be at least 60 days delinquent on the loans and owe at least 120% of the current home value
- Borrowers with second mortgages or home equity lines of credit will not qualify in certain instances
- Bank looks first to reduce principal by cutting unpaid interest tacked on as principal in calculating affordable payments
- Bank will convert certain option adjustable-rate mortgages to fixed-rate loans
- Bank aims to reduce the first mortgage to 31% of gross household income
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