In the newest attempt to stem foreclosures in Albuquerque and elsewhere in the country, Bank of America has announced that it will reduce the balance on some mortgages that owe more than the current market value.
In example some homes that sold for $200,000 during the housing boom may now be worth more like $150,000, encouraging homeowners to toss in their lost down payments and walk away in disgust. Bank of America says it will "forgive" some principal balances up to a maximum of $30,000, providing the homeowner is underwater at least 120%, or owes 20% more than the home is worth.
Since Bank of America bought Countrywide Home Loans in 2008, this has the potential to help a large number of Americans to keep their homes and hopefully prevent another flood of foreclosures as more of the negative-amortization and adjustable rate mortgages with baloons become due.
Here is how the program will work for an eligble mortgagee:
The bank will create a separate, interest-free "forebearance" account that covers a five year period. The $50,000 overage goes into this temporary account, and your new mortgage is based on $150,000 instead of $200,000. In some cases the interest rate can be reduced as well, resulting in much lower payments.
During the first year, if the homeowner makes the new, reduced payments on time, the bank will "forgive" $10,000 of the overage.
The second year, providing the house is still in an underwater condition, another $10,000 will be dropped.
The third year brings the same, providing the homeowner is continuing to make timely payments and the house is still over-mortgaged. This brings the amount "forgiven" to $30,000.00.
During the fourth and fifth years, your situation would be re-evaluated, and if you still benefitted from the reduced payments, they could remain the same. However, if the house has appreciated, or your principal balance is now under 100%, no more would be forgiven for that year. If home prices have not gone up and your mortgage is still more than the market value, they may elect to forgive $10,000 more these final two years until the total overage of $50,000 is met.
On certain negative-amortization mortgages, the bank may forgive the principal amount down to a 95% loan to value level as well.
Wells Fargo has also announced similar plans to reduce negative equity balances, and the Obama Administration has announced measures aimed at getting lenders to reduce underwater borrowers' principal balances and refinance their mortgages into government-sponsored loans. Government programs could affect loan modifications offered by many other banks and mortgage companies.
With these programs coming into effect, the prices of Albuquerque homes for sale will hopefully stabilize and our real estate market will bounce back sooner instead of later.
If you are a homeowner currently facing this situation, be sure to contact your mortgage company and find out your options before you decide to walk away from the home that you love.
If you are a buyer looking for a home in Albuquerque, there is no better time to buy than right now. Use our website to search the Albuquerque MLS and find just the one for you.