Bank of America Begins Mortgage Principal Reduction Program Under HAMP | Loans — Credit — Debt — LoanSafe.org

Many peo­ple in real estate with­hold infor­ma­tion regard­ing prin­ci­pal reduc­tions. The HAMP pro­gram has a four prong approach to mod­i­fy­ing home loans to get home­own­ers to the magic 31% of income pay­ment amount. The prin­ci­pal ways loan ser­vicers have used to meet this magic num­ber  are to extend the term — from 30–40 years, chang­ing the inter­est rate from an adjustable rate mort­gage to a fixed rate loan or reduc­ing the inter­est rate on the exist­ing loan — or a com­bi­na­tion of all three tech­niques. Not sur­pris­ingly, bank and lenders have with­held the most obvi­ous way to keep home­own­ers in their homes — prin­ci­pal reduction.

The new finan­cial reg­u­la­tions will have that affect on lenders begin­ning in 2011 — the fol­low­ing arti­cle out­lines some of Bank of America’s tac­tics in regards to prin­ci­pal reductions.

Among sev­eral enhance­ments to the NHRP announced in late March, the bank unveiled this inno­v­a­tive approach to employ­ing 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 — ahead of low­er­ing the inter­est rate and extend­ing the term. The reduced prin­ci­pal bal­ance will be a non-interest bear­ing for­bear­ance amount, and the home­owner may earn for­give­ness of the for­borne amount by remain­ing in good stand­ing on payments.

via Bank of Amer­ica Begins Mort­gage Prin­ci­pal Reduc­tion Pro­gram Under HAMP.