BofA Implements Principal Reductions Under NHRP

f America has begun implementation of an earned principal-forgiveness approach to modifying certain loans eligible for its National Homeownership Retention Program (NHRP). The plan is being offered to homeowners who owe considerably more on their loan than the current value of their home, when the loan is being considered for modification through the government's Home Affordable Modification Program (HAMP). Among several [link=]enhancements[/link] to the NHRP announced in late March, the bank said it would employ a principal reduction as the first step toward reaching HAMP's affordable payment target of 31% of household income when modifying certain NHRP-eligible mortgages – ahead of lowering the interest rate and extending the term. The NHRP enhancement was implemented on schedule in mid-May with the mailing of the first letters notifying customers who may qualify for the new program, the bank says. The first trial modification offers under the earned principal-forgiveness program may be ready for mailing as early as in the second half of this month. In the first round of outreach, letters outlining the program and requesting financial information are being sent to certain NHRP-eligible homeowners who are more than 120 days overdue on payments. NHRP-eligible loans include subprime mortgages, pay-option adjustable-rate mortgages (ARMs), and prime, two-year hybrid ARMs originated by Countrywide on or prior to Jan. 1, 2009, if the amount of principal owed exceeds the current property value by at least 20% and the loan is 60 days or more past due. The U.S. Treasury Department has announced a similar earned principal-forgiveness concept for HAMP that will be effective later this year and may be considered for a broader range of loans. "We met our goal to begin offering this program in mid-May, providing opportunities for customers who are in the most imminent danger of foreclosure to begin trial modifications by the end of June," says Jack Schakett, credit loss executive for Bank of America Home Loans. "At the same time, we are aligning the NHRP enhancement with some guidelines we expect to be included in the government's program when it is rolled out in the coming months." As part of the alignment, Bank of America may offer earned principal forgiveness over a five-year period, as it announced in March, or over the three-year time frame that Treasury intends to include in its HAMP principal-forgiveness design, depending on individual borrower situations. SOURCE: [link=]Bank of America


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