New Bank of America foreclosure prevention tactic

User Forum Topic
Submitted by orthofrancis on October 6, 2008 - 2:39pm

Bank of America has taken an extrememly aggressive foreclosure prevention strategy. It will limit mortgage payments to no more than 34% of gross income. My question is - what happens to all of the rest of the money owed? Does BOA just increase the length of the mortgage, or just take the loss? I would think that on some houses, the income would make for rather lengthy payment terms - 90+ year mortgages, where people would just walk.
http://money.cnn.com/2008/10/06/real_est...

Please no party discussion/blame faults, etc. Just keep the discussion to BOA, and how this strategy may, or may not work.

thanks

Submitted by lookingagain on October 6, 2008 - 3:57pm.

It sounds to me as though BofA will be writing it off. What I would like to see (although it could never happen) is to have all principal write-downs be recorded as sales. Otherwise, those who bought at the inflated prices get the break but those of us who waited out this insanity still have to deal with the absurd prices that sellers still think their home is worth.

Submitted by PadreBrian on October 6, 2008 - 4:05pm.

hahah, us guys who waited get funked again.

Submitted by Huckleberry on October 6, 2008 - 4:34pm.

My thought on this is BofA announced it will do this because of the litigation and settlement. I'm sure they figure if they state they are voluntarily doing this, they will not be mandated by the govt to do it.

It's really hard for me to believe the banks would just take the hit (write-off) completely, and just expunge the borrower of the original obligation and lost loan value.

I would speculate they will minimally lower the principal loan amount (from original) and work some sort of deal where they get compensation on the end of the loan. Maybe making new mortgages a 40 or 50 year and the interest fixed a 6.

Here is an article by MM related to how CW/BofA is structuring their mortgage modifications:
http://mrmortgage.ml-implode.com/2008/09...

I'll bet the new program is along these lines...

Submitted by meadandale on October 6, 2008 - 5:26pm.

I'm thinking of calling Citi Mortgage and telling them that I don't want to pay my mortgage anymore if they don't write down my principle at least a hundred grand. Otherwise I'll just hand them the keys. Think it will work?

Submitted by jficquette on October 6, 2008 - 7:29pm.

lookingagain wrote:
It sounds to me as though BofA will be writing it off. What I would like to see (although it could never happen) is to have all principal write-downs be recorded as sales. Otherwise, those who bought at the inflated prices get the break but those of us who waited out this insanity still have to deal with the absurd prices that sellers still think their home is worth.

Actually, you could use this to back into it. If you know the median house income you could multiply by 34% for the payment x 360(assume 30 yr loan) and then discount it back for the value using say 6.5%

John

Submitted by nostradamus on October 6, 2008 - 10:08pm.

jficquette wrote:

Actually, you could use this to back into it. If you know the median house income you could multiply by 34% for the payment x 360(assume 30 yr loan) and then discount it back for the value using say 6.5%
John

That's seeing the glass half full!

SD Median Income: $64k
Gross: ~$46k
Monthly: ~$3800
div3 = $1267
x12x30 for a 30-year: = $456k paid to bank (including interest)
reverse amortize (take out the interest) => with 20% down, 6% interest, the median home price should be: $264,500.00

Maybe BoA is trying to tell us something?

Submitted by Coronita on October 6, 2008 - 10:12pm.

meadandale wrote:
I'm thinking of calling Citi Mortgage and telling them that I don't want to pay my mortgage anymore if they don't write down my principle at least a hundred grand. Otherwise I'll just hand them the keys. Think it will work?

It only works if you don't have a significant downpayment and have no assets to boot.

In other words, if you were actually responsible and put a non-trivial downpayment, chances are that won't work. And if you refinance and turn it into a recourse loan, and you have assets, who knows if they go after you.

In fact, that might be a great business idea. Collection agency to collect on recourse loans.

Submitted by Coronita on October 6, 2008 - 10:20pm.

Huckleberry wrote:
My thought on this is BofA announced it will do this because of the litigation and settlement. I'm sure they figure if they state they are voluntarily doing this, they will not be mandated by the govt to do it.

It's really hard for me to believe the banks would just take the hit (write-off) completely, and just expunge the borrower of the original obligation and lost loan value.

I would speculate they will minimally lower the principal loan amount (from original) and work some sort of deal where they get compensation on the end of the loan. Maybe making new mortgages a 40 or 50 year and the interest fixed a 6.

Here is an article by MM related to how CW/BofA is structuring their mortgage modifications:
http://mrmortgage.ml-implode.com/2008/09...

I'll bet the new program is along these lines...

You know, no offense to some of you older farts...I sort of chuckled when I heard some folks in their mid 40ies or 50ies getting a 30 year loan.

But....How does a bank justify a 40 or 50 year loan for someone that is in their mid forties or older? Do the banks really expect someone to work until 85-95???

LOL..Sorry, not that I'm trying to make fun of older people. But I always though 30year loans were pushing it already beyond a certain age. But a 40 or 50 year loan?

Perhaps banks will start adopting a loan program such that it makes your kids co-sign.

Submitted by mortgage3 on October 7, 2008 - 8:42am.

They could either attach a silent 2nd lien or write it off.
An old co-worker of mine was offered foregiveness on his entire 2nd. They were willing to make it a silent 2nd, which he'd have to pay off if/when he sold the home. He didn't like that option. I don't know the final outcome(what decision he made) and I can't remember who the lender was.

That is going to be a huge hit for BofA. I wonder if they will use the income stated on the 1003, or if they will requalify them on their current real income. Don't forget that CW did a ton of stated option ARM's and the minimum payment(1%) was used to qualify them.

Submitted by Aecetia on June 4, 2011 - 9:33pm.

Justice! "Instead of Bank of America foreclosing on some Florida homeowner, the homeowners had sheriff's deputies foreclose on the bank."

http://www.digtriad.com/news/watercooler...

Submitted by Scarlett on June 4, 2011 - 9:55pm.

Sweet!!!

Submitted by paramount on June 6, 2011 - 10:25pm.

More proof that fascism is here, alive and well in the United States.

Submitted by urbanrealtor on June 7, 2011 - 9:02am.

paramount wrote:
More proof that fascism is here, alive and well in the United States.

The actions described here were neither nationalist nor radical.

It was simply bullying on the part of a disorganized bank and there comeuppance in court and with the sheriff.

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