AgentMortgage

Principal reductions may catch on

Future-Proof: Navigate Threats, Seize Opportunities at ICNY 2018 | Jan 22-26 at the Marriott Marquis, Times Square, New York

Last March, Bank of America initiated a plan to lower the principal balance on home mortgages by as much as 30 percent for thousands of its distressed borrowers. The announcement was a bit of a stunner because loan modification programs that are truly intended to shrink monthly payments are all about reducing interest rates or extending terms, i.e., from 30 years to 40 years. Indeed, most lenders would probably rather accept any alternative other than reducing principal as a way of helping borrowers who are underwater with their mortgages.(Editor's note: Bank of America announced the addition of earned principal reductions to its existing National Homeownership Retention Program (NHRP) as part of a settlement with the Massachusetts Attorney General, which had filed a complaint against Countrywide Financial Corp.; Bank of America acquired Countrywide in 2008.) While a groundbreaker, the BofA program is limited to the old Countrywide borrowers who now find their loan balance is ...