BoA offered a PRINCIPAL REDUCTION!

[DeadManCrawling]

I just got off the phone with BoA.

They are offering a reduction of principal, which I think is quite rare.

$65k off the top of my loan of 385k. New loan amount: 320k

The offer also includes a 2.5% interest rate, but no word on whether this is an introductory offer or how long it would be in place. They did say the payment would never again exceed $1,800/month, including escrow and taxes, which is half of what it was before.

The numbers:

Currently pay $3,800 per month.

New payment: $1,100 per month.

This may cause me to reconsider and keep the place. That reduction is enough to offset the horrible utility bills and maintenance costs.

They hired a third-party company to come visit us. The woman was very kind, but a little nervous. Someone pulled a gun on one of her colleagues a week or so back. I can see why she was edgy at first.

She called a BoA number and got through immediately to someone who seemed to be on the ball. They said to expect the loan docs in the next 4 weeks or so. She said they are very backed up right now.

The lady on the phone seemed stunned that a principal reduction popped up on her screen. She didn't know how to handle that part, and had to put me on hold to verify the info was correct and ask a supervisor how to best explain it to me.

I will let you know, in a few weeks, what the docs say. Will run them by my attorney, but if the reduced payment is real, and lasts the typical five years (or longer, I hope), we may keep the place.

Details for anyone interested:

I do not have a second on the house.

We have not made a payment since February 2009. No lis pendens has been filed and foreclosure has not been initiated.

I used to call every month to reapply, fax some docs, and so on. I had no plans of staying, but they were so confused I figured it might buy time.

What they are asking for: Hardship letter regarding my back surgery. P&L statement for last quarter (self-employed). 2 months bank statements.

best wishes,

-dmc

[NewLifeAhead]

Well, that's a good way to end the week!!!! I hope it works out for you, congratz.

When you get the docs, look for anything about what happens if you decide to sell the house within the 5 years, just curious.

[fooked]

that's FANTASTIC!!! keep us in the loop!

[SleepWellNow]

Wow! That sounds like a great offer. I have been following a loan modification forum and principal reductions are almost unheard of. Did they say what they were doing with your late payments? Please keep us all informed with how this works out for you.

Wishing you nothing but the best!

[Flamingo]

You really need to inquire before you sign anything that you will not be able to sell the house in the future without paying back the amount of the reduction. This was done previously in loan modifications and that is what this sounds like. You are not really getting a reduction; if you sell the house you will have to pay back that amount at settlement to BofA. Get those papers reviewed by an attorney prior to signing.

[HHM]

That is good news. But as Flamingo points out, make sure to review the paperwork for what exactly is happening to the $65,000. Are they merely turning it into a 2nd mortgage that you do not have to pay, etc.

Also, I can Guarantee that the 2.5% interest rate is merely a short term deal.

But, that modification appears to be a good result assuming it works for you. Just be careful, if you miss a payment in the future, the modification will disappear, they will probably re-age the loan and add back interest and fees from the date of the modification, so make sure this will really work for you, or are you merely delaying the inevitable.

Here is the big question, is the home worth $320,000? If not, if the home would only sell for $280,000 now, this modification is only delaying the inevitable.

[DeadManCrawling]

Good points all around, thank you.

The home would probably sell for that price, if we were happy to wait a bit.

In any case, we will still be filing Ch 7 in the future. I will check with attorney, but filing Ch 7 after the modification would seem to remove any future liability either way, no?

Once I get the paperwork, I will bring everything to the board for discussion.

Best wishes,

-dmc

[nc73]

Banks must be desperate these days...

[IBroke]

I will check with attorney, but filing Ch 7 after the modification would seem to remove any future liability either way, no?

That's correct.

[HHM]

but filing Ch 7 after the modification would seem to remove any future liability either way, no?

You need to be careful here; if part of the modification includes the subordination of the principal reduction as a 2nd mortgage, (essentially a new note), and you file BK afterward, the lender could claim fraud and object to the discharge of that note (and what I mean by discharge, is the discharge of your personal responsibility for that note).

[Amy26]

Yea I think I remember someone else saying that they were working out a loan mod before they filed for BK and then after they filed the bank refused to continue with the mod.

[justbroke]

This is great information. Wish I had Bank of America.

[DeadManCrawling]

but filing Ch 7 after the modification would seem to remove any future liability either way, no?

You need to be careful here; if part of the modification includes the subordination of the principal reduction as a 2nd mortgage, (essentially a new note), and you file BK afterward, the lender could claim fraud and object to the discharge of that note (and what I mean by discharge, is the discharge of your personal responsibility for that note).

Thank you.

If we go forward with the modification (which I won't know for weeks), we plan to stay here for a long time. I have no plans to file ch 7 for a while, possibly years. I will ask the attorney, but it seems bad faith or fraud would become a lesser consideration with passage of time.

[bluemartini]

D@mn.... that is pretty amazing.

Well, congratulations....I thought principal reductions were urban myth!

My property is currently being offered for $140k in a short sale. The lender approved that amount, whereas the mortgage/Heloc are at about $220k.

If the lender would offer the $140k price to me, I'd jump on it in a heartbeat and happily pay them every month instead of the rental apartment where I currently live --- but they won't.


Meanwhile I don't have any buyers either. It's a lose-lose situation. I lose my house and the bank gets zip and assumes my insurance premiums. At least for now.

[Flamingo]

D@mn.... that is pretty amazing.

Well, congratulations....I thought principal reductions were urban myth!

My property is currently being offered for $140k in a short sale. The lender approved that amount, whereas the mortgage/Heloc are at about $220k.

If the lender would offer the $140k price to me, I'd jump on it in a heartbeat and happily pay them every month instead of the rental apartment where I currently live --- but they won't.


Meanwhile I don't have any buyers either. It's a lose-lose situation. I lose my house and the bank gets zip and assumes my insurance premiums. At least for now.

A "principal reduction" in a mortgage modification usually means the amount reduced will have to be paid back when the house is sold. It is not a free ride. Most modification programs in the recent past utilized this and that is why they were not very popular. They are still being used as the OP will probably find out. If banks were in the business of giving houses away, even those folks not in financial trouble would be clammering for a principal reduction since their homes lost value also. That is why it is necessary to fully understand what one is signing with a modification and realize what may be involved. It is always best to have an attorney look over any mortgage or refinancing paperwork before signing.