(MoneyWatch) Bank of America Home Loans is getting ready to give away billions of dollars. To get a piece of this pie, you have to have an existing mortgage with them, be late on your payments and owe more on the mortgage than your home is worth.
The mortgage lending and servicing unit, that includes the former Countrywide Financial business, has begun sending letters to customers informing them that they may forgive a portion of the principal balance on their mortgage.
In 2008, Bank of America (BAC) made an ill fated purchase of the failing Countrywide Financial for $4.1 billion. In 2006 Countrywide financed 20% of all mortgages in the United States, many of which were the toxic option ARM variety, at a value of about 3.5% of United States GDP. They issued more mortgages than any other single mortgage lender.
Bank of Americas new mortgage relief plan is targeted to reach out to more than 200,000 potential candidates for this assistance. The estimate is that folks who qualify could see up to $150,000 chopped off the balance of their mortgage, resulting in a 30 percent reduction in the mortgage payment.
This program is an expansion of the principal reduction offers the bank began offering in March, where they initially concentrated on homeowners who were already in the modification review process. So far under that program, about 5,000 trial modification offers have been mailed, providing a potential total of more than $700 million in forgiven principal, according to a statement issued by Bank of America.
The mailings beginning this week are designed to reach a broader base of customers who may be eligible for this principal reduction program.
According to Bank of America, to be eligible for this program, a homeowner must meet certain criteria, including:
- Owes more on the mortgage than the property is worth today.
- Was at least 60 days behind on payments on Jan. 31, 2012.
- Has a contractual monthly payment for principal, interest, property taxes, hazard insurance and any applicable homeowner association fees totaling more than 25 percent of gross household income.
- Has a loan that is owned and serviced by Bank of America, or serviced for another investor that has given the bank delegated authority to do such modifications.
The last requirement means that folks with loans that are backed by Fannie Mae, Freddie Mac and FHA/VA will not be eligible for this new program.
To find out more, folks can call Bank of America Home Loans at 1-877-488-7814.
So to sum it up, folks who took out mortgages that are now more than the value of their house and are late on their payments have an opportunity to get a lot of free money.