Bank of America (NYSE: BAC) announced Wednesday that it has started implementing the principal forgiveness portion of its National Homeownership Retention Program (NHRP). The initiative offers reduction to a borrowers’ principal if they are considerably underwater on their loan.
The plan was officially announced in March, at which time Bank of America said principal reduction would be the first step looked at for those eligible when working toward an affordable mortgage payment through the Home Affordable Modification Program (HAMP).
“Our tests have shown that many homeowners who are severely underwater on their mortgages will respond positively to a modification offer that includes reduction of their principal balance, increasing the rates of acceptance of HAMP trial modification offers, conversion to permanent modifications and long-term success of the homeowner,” said Jack Schakett, credit loss mitigation executive for Bank of America Home Loans.
“We met our goal to begin offering this program in mid-May, providing opportunities for customers who are in the most imminent danger of foreclosure to begin trial modifications by the end of June,” said Schakett. “At the same time, we are aligning the NHRP enhancement with some guidelines we expect to be included in the government’s program when it is rolled out in the coming months.”
According to the bank’s statement, NHRP-eligible loans include subprime, Pay-Option ARM and prime-quality two-year hybrid ARM loans originated by Countrywide on or prior to January 1, 2009, if the amount of principal owed exceeds the current property value by at least 20 percent and the loan is 60 days or more past due.
