Bank of America’s Principal Reduction Program facts

So much has been discussed about Bank of America’s new Principal Reduction program and how it will help struggling homeowners. The facts are listed here for your review and specifically quoted from the B of A announcement with underlined words to keep in mind.

When the loan is being considered for restructuring through the government’s Home Affordable Modification Program (HAMP) qualifying borrowers, will receive a principal reduction as the first step toward reaching HAMP’s affordable payment target of 31 percent of household income, ahead of lowering the interest rate and extending the term. The reduced principal balance will be a non-interest bearing forbearance amount, and the homeowner may earn forgiveness of the forborne amount by remaining in good standing on payments.

Loans eligible for principal forgiveness include subprime, Pay-Option adjustable-rate mortgages (ARMs), and prime-quality two-year hybrid ARM loans originated by Countrywide before January 1, 2009. The amount of principal owed must exceed the current property value by at least 20 percent and the loan must be at least 60 days past due.

There you have it. If you fit within this criteria…you “may” get a modification from B of A if they can keep track of the paperwork you’ll need to resend to them 11 times. 🙂

Reports from Hope Now a congressionally-formed private sector alliance of mortgage servicers says that 172,000 modifications were offered to homeowners in April 2010 up 43% from the same month of 1009. Over 400,000 proprietary modification were offered to homeowners. These are banks own mod programs that use the MHA as a guideline.

Hope now also goes on the say that since 2007 over 3 million homeowners have received some kind of modification. I LOVE HOW THEY ONLY MENTION HOW MANY GOT DONE AND NOT HOW MANY APPLIED AND OR WERE TURNED DOWN. No one really knows the number, but studies suggest less than 13% of all homeowners seeking help actually get it.

I think Hope Now needs to address the other 87%.

Remember, every single document you sent to B of A (if you are going to handle this yourself) needs to be considered. The bank can and will deny you based on too much income, too much savings or other various ratio-related figures.

If you have any questions, I can help coach you on what to send and what not to send to the bank. Please call me with any questions. John Callahan 623-252-0545.


Loan or No Loan? Borrow only when it makes sense

Not too long ago anyone with a pulse could qualify for a loan. Now millions of people are burdened with debt and have not been able to slow their spending. Here is a simple test with 6 questions to determine if you should borrow.

  1. Are you investing in an asset that will add to your net worth over time like a degree or a business?

  2. Is the loans interest tax deductible?

  3. Is your credit score high enough to qualify for the lowest interest rate?

  4. Will your total debt payments remain less than 30% of your pre-tax income?

  5. Could you afford the payments even if you were out of work for six months?

  6. Can you re pay the loan without a penalty?

    Before you take on any new debt take a good look at your current debt. Have you completed a detailed debt to income worksheet so you can see your total debt on one page? This is a helpful exercise. Few people actually do it because they know they won’t like what they see. This is the only way to “shift your compass” and begin to think about debt in a different way because debt robs us of our freedom.

Start by writing down all your monthly expenses. Everything that goes out in a payment each month. Then write down your total net ( take home ) income. You should be spending less than what you earn. If you spend more than what you earn, it’s only a matter of time before you have issues. We help people re-negotiate their excessive credit card debt once it’s too late. Don’t let this happen to you.

If you spend less than what you earn, you can budget a specific amount each month for fun and for secure savings. Use the excess income to fund your future with the power of compound interest. There are a couple of simple ways to reduce debt and secure your financial future with this plan. This is how you retire comfortably and you must begin sooner than later.

Contact 360 Group for more information or a free confidential consultation that will open your eyes. All the information you need is out there, and has been available for decades. We just present it to you so that you can become empowered by the knowledge.

360 Group is a financial advisory firm dedicated to education about fiscal responsibility and teaching people How To Save Money.

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