Yesterday, Bank of America Executives unveiled their new "Principal Reduction Enhancement Program", which is an earcned principal forgiveness plan for broowers behind on their mortgages and whose loans are at least 20 percent underwater.
The Plan employs a 'principal reduction as the first step toward reaching HAMP's affordable payment target of 31 percent of household income when modifying certain NHRP eligible mortgages (rather than lowering the interest rate)
WHY ARE THEY GETTING MORE AGGRESSIVE?
The simple reality, as we've predicted since the blog began, is that borrowers are walking away in masses. The B of A exces now acknowledge that the problem is beginning to snow ball. Jack Schakett, a B of A credit loss mitigation executive, admitted that the number of 'strategic defaulters' were more than B of A has ever experienced before. Schakett says that the foreclosure process is still taking 13 to 14 months, which equates to over a year of free rent for defaulters.
In March, 31 percent of foreclosures were deemed to be 'strategic defaults' according to a recent study by Northwestern Univeristy.
While its encouraging that Bank of America, who has been notoriously difficult on borrowers in the short sale and foreclosure process, is working to assist borrowers, I question the secondary effects as those that stay current on their mortgage question why they are not privy to the same privileges. In the end, I fear it will only encourage more homeowners to default on payments.
For more information, consider contacting a Seattle Foreclosure Attorney.
Weitz Law Firm, PLLC
5400 Carillon Point
Kirkland, WA 98033