Bank of America Suddenly Being Nice to Upside Down Homeowners?

Bank of America announces a plan to reduce principal balances for SOME upside down homeowners.  What's really under the leaf they appear to be turning over?

MORTGAGE, EXPERT, MICHIGAN, BIRMINGHAM, BLOOMFIELD, DETROIT, ROCHESTER, ROYAL OAK, TROY

The real story is that this is part of a settlement the bank reached with several state attorney generals 18 months ago over Countrywide high-risk loans.  Seems Countrywide made some loans to people that really couldn't afford them and Bank of America inherited the problem when they took Countrywide over.

So, before every upside down homeowner with a Bank of America mortgage gets too excited, they need to understand that it will only be applied in limited circumstances.

First, it will probably only apply to mortgages originally with Countrywide that Bank of America inherited.

Then the following must apply:

• Upside down homeowner must be at least 60 days delinquent on their mortgage


• Must owe more than 120% of their home's current value

Upside down homeowners meeting the above qualifications will then have the qualifying principal portion deferred, interest free, for up to 5 years.  As long as the homeowner makes their agreed upon payments during that time frame, the set aside principal will be forgiven.  The maximum that can be deferred is 30% of the loan balance or the amount needed to bring an upside down homeowner "even".

Sounds like they really want borrowers to stay in their homes and slow down foreclosures.  It's actually not a bad setup to encourage that.

This announcement has generated a lot of hopeful buzz in the mortgage industry and in political circles that this plan, if successful, maybe used as a model by the Obama adminsitration as the next plan of attack to stabilize the housing market.

Interesting to note that since the start of the Housing Crisis, most of the economic professors and experts have been saying that principal reductions would be needed to stabilize the market.

How many billions has the Obama administration thrown away already because they didn't listen to the experts, but chose to play politics?