Homeowners may qualify for principle reduction on loans

Back in March, Joel Doelger of Credit Counseling of Arkansas (CCOA) said there was a problem with people either discarding letters from their lenders or believing those letters were from scammers out to make some cash off people going through bad times.

At the time, Doelger said the letters at issue informed borrowers who lost homes through foreclosure that they were eligible for reviews of their cases and might be entitled to compensation if their homes were taken improperly. Doelger said some people who might have benefited from a review lost the chance to get one by tossing out their letters or disregarding them.

Since then, another reason has popped up for borrowers to keep their eyes out for letters from lenders: Bank of America announced at the first of May that it will offer thousands of borrowers the opportunity to forgive the principal on their mortgages. That principal reduction will average $150,000 per borrower, Bank of America officials said.

The catch? Borrowers who toss out their letters from Bank of America might not learn of the program and whether they are eligible. The bank estimates it will send those letters to more than 200,000 mortgage customers that might be eligible for relief. Borrowers, then, must actively pursue principal reduction under the program to receive it — the bank won’t simply reduce the amount eligible borrowers owe on their homes.

Bear in mind that Bank of America’s program is part of a $25 billion settlement with 49 state attorneys general that was announced earlier this year. Under that settlement, Bank of America — along with ALLY/GMAC, Citi, Jpmorgan Chase and Wells Fargo — agreed to compensate borrowers who were hurt by the alleged “robo signing” scandal.

That scandal, of course, involved people losing their homes through inappropriate means. All lenders that were part of the agreement will offer various programs to assist an estimated 2 million past and present borrowers on one level or another.

Of course, if those eligible for relief don’t communicate with lenders, they may well lose their chances to benefit from the settlement.

Doelger said there are a number of reasons borrowers discard beneficial letters from lenders. For one thing, some borrowers assume that any letter from a lender is bad news, and that’s doubly true when it comes to homeowners who are struggling to pay their mortgages.

For another, Doelger pointed out, there

Borrowers must actively pursue principal reduction under the program to receive it — the bank won’t simply reduce the amount eligible borrowers

owe on their homes.”

are more than a few scams out their targeting troubled borrowers. While principal reduction, potential mortgage reviews and other promises might seem too good to be true, it’s well established that close to 2 million past and present homeowners may receive something under the settlement.

Of course, people still need to be wary of scams. It’s easy enough to tell whether an offer is legitimate or not: Contact your lender or mortgage servicer if in doubt, and they should be able to verify the validity of any programs to which borrowers may be eligible.

Staying in touch with a lender is always a good idea. With the settlement out there and lenders still deciding how to implement it, good communications between borrowers and mortgagers is a better idea than ever.

Home Sweet Home is distributed by the Mortgage Bankers Association of Arkansas. Visit the Association online at mbaar.org.