On June 2nd, 2010 Bank of America, B of A, starts to implement an earned principal forgiveness approach when modifying ONLY eligible mortgage loans for it’s National Homeownership Retention Plan (NHRP) for homeowners that have a balance is higher than 20% of their homes current value and are being considered for the governments “OBAMA” Home Affordable Modification Program better known as HAMP. Currently they are one of the very few lenders that is willingly starting to offer principal reductions to their borrowers.

B of A Reducing Principal

B of A announced enhancements to their National Homeownership Retention Plan, NHRP, in late March and on June 2, 2010 Bank of America unveiled this unique approach to implementing a principal reduction as the FIRST step toward reaching the target of 31 percent of gross household income ratio for the Home Affordable Modification Program HAMP’s guideline when modifying certain NHRP eligible mortgages in front of lowering the interest rate and extending the term, this is great news for eligible loans.

Bank of America’s NHRP will first take the reduced principal balance as a non-interest bearing forbearance amount then the homeowner can earn the forgiveness by remaining in good standing with their payments.

The new enhancement on the NHRP was first implemented in min-May as they notified certain customers who may qualify for the new program.
Borrowers need to submit the documentation requirements for consideration to determine eligibility and underwriting of the National Homeownership Retention Plan (NHRP). Once reviewed and processed for the plan the first trial modification earned principal forgiveness program offers may be ready for mailing the latter part of June.

The National Homeownership Retention Plan (NHRP) eligible loans include subprime, Option ARM loans (Pick a Pay) as well as prime quality 2 year hybrid Countrywide originated ARM loans originated prior to January 1, 2009 as long as the principal balance exceeds 20 percent of the current property value and the loan is 60 days or more delinquent.

According to reports the Department of Treasury has announced a similar concept that will be effective later this year and may be considered for a broader range of loans, lets hope this happens soon.

More information can be found here

Bank of America states:
“Encouraging more borrowers in this situation to accept a homeownership retention solution may help stabilize the surrounding community to the benefit of neighboring homeowners.”

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.

Here is how it would work:
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 timeframe that Treasury intends to include in its HAMP principal forgiveness design, depending on individual borrower situations.

In a press release Bank of America stated:
Since the initial outreach to customers under the NHRP in December 2008 through March of this year, Bank of America has offered an NHRP modification or started an NHRP-eligible trial modification under HAMP for more than 200,000 homeowners. The offers have provided potential aggregate savings of principal and interest totaling $9.1 billion over the full terms of the loans, which exceeds the original three-year estimate of up to $8.4 billion made at the time the program began. More than 100,000 modifications have been completed under the NHRP, and 43,000 more NHRP-eligible homeowners have entered a HAMP trial payment plan. Through all programs, Bank of America has completed more than 600,000 mortgage modifications since January 2008.

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