Is My VA Home Loan Eligible for the Bank of America Principal Reduction Program?
The HUDdle, an official blog found at the Department of Housing and Urban Development, recently linked to a news story at a website called Commercial Appeal regarding Bank Of America’s loan reduction program.
According to the blog post, “More than 200,000 letters from Bank of America will begin landing in homeowners’ mailboxes this week, the bank said today, offering principal reduction as part of the $25 billion mortgage settlement announced in February.”
That settlement made headlines earlier in 2012–it was the result of negotiations between the government and five leading nationwide mortgage companies; Bank of America’s announcement is part of fulfilling that company’s obligations under the settlement agreement. Under the program, qualified homeowners could save as much as 30 percent of their monthly mortgage payments thanks to Bank Of America’s commitment to reduce the borrower’s principal loan amount.
To qualify for Bank of America’s program, borrowers eligible for this principal reduction program must be underwater on their mortgages (owing more than the property is worth), have fallen behind on payments by 60 days or more as of January 31, 2012, and have a monthly mortgage payment that comes to “at least 25 percent of gross household income” according to CommercialAppeal.com and a story posted by the New York Times.
This principal reduction program is NOT for all borrowers. Only those who have loans “owned and serviced by Bank of America, or serviced by Bank of America and owned by an investor who has given the bank permission to reduce principal.” Homeowners looking to be included in the 30% reduction in principal should read the last part of that statement, as it’s a key factor in who gets to participate in the principal reduction program and who does not.
According to the CommercialAppeal.com news story, “Government-backed housing giants Fannie Mae and Freddie Mac have not given permission; nor have the Federal Housing Administration and the Department of Veterans Affairs.” (Emphasis ours.)
Until the Department of Veterans Affairs says differently, VA borrowers who might otherwise be eligible for the Bank of America principal reduction program cannot participate. While there is no guidance from the VA at the time of this writing, that does not mean some clarification might come at a future date. To learn more on the VA stance on this program, call them directly at 1-800-827-1000.