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Foreclosure Avoidance Bank of America’s Approaches and the Home Affordable Modification Program. Allen H. Jones Default Policy Executive Bank of America. Overview.
Allen H. Jones
Default Policy Executive
Bank of America
At Bank of America, helping customers sustain home ownership and avoid foreclosure is not a new practice, but a well established one where we are proud to be playing a leadership role. The company’s home ownership preservation efforts encompass:
Regardless ofthe program utilized, early contact and open communication with borrowers is the most critical step in helping to prevent foreclosure. We need to understand our borrowers’ specific needs, their current financial situation and circumstances in order to prescribe a viable solution. In 2008, Bank of America and Countrywide proactively reached out to borrowers through:
Bank of America is proud of the role we are playing in helping borrowers through these difficult economic times. We are committed to being a responsible lender and servicer, and facilitating home ownership and retention.
In keeping with our commitment to helping borrowers retain homeownership, Bank of America is fully participating in the Homeownership Affordability and Stability Plan announcedon February 18th by President Obama, extending new foreclosure prevention and refinancing options to eligible customers nationwide.
The loan modification program is intended to provide uniform loan modification standards for at risk borrowers. It reduces mortgage payments to a target 31% front-end first mortgage debt-to-income (“DTI”) ratio to make payments affordable and sustainable. This is accomplished by:
In addition, lenders and servicers also have other options to achieve the 31% target ratio, such as principal forgiveness, which is permitted but not required, and Hope for Homeowners.
Not everyone will qualify for the Home Affordable Modification program. For example, borrowers will not qualify if: their mortgage is greater than $729,750 (or higher limits for 2-4 unit properties); their loan was originated after January 1, 2009; their loan is not a first-lien loan; their mortgaged property is not their primary residence; they can afford to make their current mortgage payment; they are current on their mortgage payments and not in imminent default; they have no ability to pay their mortgage or cannot afford to make payments at the 31% target ratio; their income cannot be verified or they are unable to meet other underwriting criteria; or they have no desire to remain in the home.
Bank of America will work with borrowers that are not eligible for the Home Affordable Modification program to pursue other foreclosure prevention options.
Once eligibility is preliminarily determined, the borrower is placed on three (3) month trial period to qualify:
Treasury will partner with financial institutions to reduce homeowners’ monthly mortgage payments. The lender will have to first reduce payments on mortgages to no greater than 38% Front-End Debt-to-Income (DTI) ratio. Treasury will match further reductions in monthly payments dollar-for-dollar with the lender/investor, down to a 31% Front-End DTI ratio for the borrower.
While there is a workout program for nearly every situation where the borrower has some ability to make a mortgage payment, there is no workout/foreclosure prevention program for: