ATTORNEY GENERAL LOAN MODIFICATIONS AND PRINCIPAL REDUCTIONS CHRISTMAS COMES EARLY – AT LEAST FOR SOME

We have finally seen our first few loan modifications under the National Mortgage Settlement entered into between the Attorney Generals of the various states and the “Big Five”: Chase, Citi, Bank of America, Wells Fargo, and Ally. So far we have only seen Bank of America modifications emanating from their acquisition of Countrywide. The ones that we have seen are good, very good. We are talking about principal reductions in excess of 50%. We are trying to do some detective work and, apparently, Bank of America has outsourced these particular modifications to a company in Houston, Texas called Home Retention Group, Inc. That is all that we found out so far. We are also trying to figure out how one qualifies for one of these “unicorns.” In a press release put out a couple of weeks ago, Bank of America outlined the following criteria:

1. The loan has to be upside-down.

2. As of January 31, 2012, it must be in default for at least 2 months.

3. Monthly housing payments, which would include principal and interest on the existing loan, property taxes, hazard insurance, and homeowner’s or condo fees must total more than 25% of the gross household income.

4. Owned by Bank of America, or if not owned by Bank of America, serviced by them under contractual terms which would permit “modification.” No Fannie Mae, Freddie Mac, FHA or VA loans are authorized to participate in this principal reduction program. What else is new? We are looking into when the other members of the “Big Five” will be offering modifications and what type of criteria they will use. We will report on that when we have information that is reliable.

In the interim, if you have a loan serviced by Bank of America, which meets the above criteria, we strongly suggest that you contact Bank of America and specifically request to apply for a “Modification Under the U.S. Department of Justice and State Attorney General Global Settlement Agreement.” Put it in writing. I would even try sending it via certified mail so that you can prove you requested it for whatever that might be worth in the future. I would also try calling Bank of America’s toll free number 1-(800)-669-6650, but I would still put the request in writing and very specifically ask for that modification and a principal reduction.

How can you tell if your loan is upside-down? We use the national database operated by Zillow; http://www.zillow.com/. It's free and should give you a pretty good idea of what the actual current value of the property is.

I would also use the same technique and make a written request to the other four servicers; Chase, Citi, Wells Fargo, and Ally. Seems to me that you have nothing to lose.

According to the information on the Settlement, there are billions of dollars available for these types of modifications, but billions of dollars will be used up quickly. I strongly suggest that you get in line as soon as possible. We will report further in this Blog once we get additional information, however there is no excuse for not asking for something that you may be entitled to. Do it early and do it in writing.