Press RELEASE
| For Immediate Release | Contact | Phone |
| March 24, 2010 | Phyllis Salowe-Kaye, Executive Director, NJ Citizen Action |
973-643-8800 |
NJCA Comments on Bank of America Mortgage Principal Reduction Program
Newark, NJ — New Jersey Citizen Action applauds Bank of America for being the first major bank to announce a program that will modify severely underwater loans by implementing a policy to look first at principal forgiveness — ahead of an interest rate reduction -on mortgages that qualify by being substantially underwater. Bank of America reports that the new policy is designed to encourage greater customer participation in the company's homeownership retention programs and the federal government's Home Affordable Modification Program (HAMP).
Homeowners who hold mortgages that include Pay-Option ARMs, certain prime 2-year hybrid ARMs and Countrywide mortgages originated before January 1, 2009 that are NHRP-qualifying and at least 60 days delinquent with a current loan-to-value (LTV) ratio of 120 percent or higher are eligible with a maximum 30% decrease in the total loan principal balance. The homeowner's past payment performance will be reviewed as part of the evaluation.
Bank of America announced an option for customers with Pay-Option ARMs with negative amortization — the worst kind of loan possible. When the principal balance on the loan has grown because the borrower selected an option to make payments that did not cover the interest due and this payment difference was added to principal he bank will consider eliminating the negative amortization feature and forgiving all or part of the negative amortization amount to reduce principal to as low as 95% LTV.
"This program sounds very promising and I hope that the Bank will work with housing counseling agencies like NJ Citizen Action to iron out the kinks and provide this option to all homeowners who are desperate for principal reductions," said Phyllis Salowe-Kaye, executive director of NJCA. "We encourage all banks to offer similar programs and take the initiative to modify loans by using principal reduction."
The Federal Housing Finance Administration recently reported that home prices in southern New Jersey continued to decline somewhat faster in the fourth quarter than those nationwide. Another FHFA survey, which covers only home purchases, found that New Jersey prices dropped 0.4 percent in the fourth quarter and 3.7 percent for the 2009 year
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New Jersey Citizen Action is the state's largest citizen watchdog coalition working to protect and expand the rights of individuals and families and ensures that government officials respond to the needs of people rather than the interests of those with money and power. NJCA is a member of Americans for Financial Reform, a coalition of organizations working to restore fairness and stability to the financial system and rebuild our economy.
