BoA offered a PRINCIPAL REDUCTION!

[IBroke]

A "principal reduction" in a mortgage modification usually means the amount reduced will have to be paid back when the house is sold. It is not a free ride.

Hmm, I always thought that what you just described is a "principal forbearance"?!

A "principal reduction" actually means your principal balance is reduced permanently. I know the difference between these two terms from the HAMP.

[DeadManCrawling]

There are lots of good thoughts here, and I am looking forward to checking the actual docs when they arrive.

My attorney will go over them, as well and I will let the board know what is really in the paperwork.

As I said, the words given me were "principal reduction". Whether this statement is correct or misleading, I cannot say, right now, without the docs. I am aware of the payback requirement in some mods and will be keeping a close eye on how things are worded. If there is such a requirement I doubt I will keep the home.

I guess the encouraging part, if there was one, is that the woman on the telephone for the lender was obviously experienced at her job. Everything went very smoothly up until the point the "principal reduction" came on her screen. She then had no idea what to do or say and had to put me on hold for quite a while to discuss with a higher-up. She did say she had dealt with forebearances before, but not with "principal reductions", so perhaps it is more than a forebearance.

In any case, I know the bank is not my friend, really, and that their goal concerns only themselves financially.

However, if their goal and mine have a few things in common, it may be worth it to pursue.

Either way, you will all know as soon as I receive the docs. Hopefully it is as the lender says. If not, we are no worse off than before, and will go on with foreclosure.

best wishes,

-dmc

[Catia]

Ask for more principal reduction...
say a full 100k.

if they are really gonna reduce your principal, you'll get a 1099-c at the end of the year, and you can file the 982 and do the 'mortgage debt relief act' thing and not have to pay fed tax on it.

Obviously the bank is very desperate, and they offered you their 1st lowball--
they ARE prepared to go lower--fact is, if this is legit--they are looking at either reducing your principle, or eating it if you file BK and they foreclose...They will lose more if they foreclose, and they know it.

They are where you need them to be--...reality...

If what they are offering is what you think it is-this is their 1st offer-go for more--use the, well, I was gonna file BK and let them have the house--I can afford xyz, but not abc...

Go for something a little lower than what you think you can accomplish right now--the recession ain't near over yet.

Not trying to sound greedy--just keepin it real,
and lowering the mortgage by another 100 per month. lol

I hope they really are giving you a reduction and not a forebearance--there is a bunch of it going on now-it was supposed to start this way a long time ago-

-from what I've read- others are just calling it cancellation of mortgage, mortgage forgivness etc--This is the whole reason the 'mortgage forgiveness debt relief act of 2007' was written in the 1st place--so that people would not have to pay high taxes on the cancelled/forgiven mortgage debt when they were struggling to get back on their feet.

http://www.irs.gov/individuals/article/0,,id=179414,00.html

[liboton21]

but filing Ch 7 after the modification would seem to remove any future liability either way, no?

You need to be careful here; if part of the modification includes the subordination of the principal reduction as a 2nd mortgage, (essentially a new note), and you file BK afterward, the lender could claim fraud and object to the discharge of that note (and what I mean by discharge, is the discharge of your personal responsibility for that note).

What about if I am going to reaffirm the mortgage and no involvement of principal reduction, can I file for C7 for my unsecured debts?

[hereforinfo]

I would be very cautious if I were you. Is this a fannie mae or freddie mac backed loan? If so, principal reductions/forgiveness are prohibited on those loans, including the HAMP program. Forbearance is possible, meaning a balloon payment due in full when you sell the house or at the end of the loan. However, if there is a second mortgage that lien holder would have to agree to subordinate their position since forbearing principal, aka balloon, would require changing the the first note (which would bump it from the first position unless the second agrees to let them stay).

[IBroke]

However, if there is a second mortgage that lien holder would have to agree to subordinate their position since forbearing principal, aka balloon, would require changing the the first note (which would bump it from the first position unless the second agrees to let them stay).

Could you please explain that a bit further (incl. other sources) because I never heard of that from anybody else before.

[justbroke]

Could you please explain that a bit further (incl. other sources) because I never heard of that from anybody else before.

This is standard "non-bankruptcy" lien guidelines.

If you re-write the mortgage/note and need to record it... the recordation would be after any other liens. Since the "new" lien would be recorded after the second, the new lien becomes a subordinate to the 2nd. (The 2nd moves into the first position!) This is just the way liens work.

The real problem with a first being modified is that the "term" is changed. When the term changes, that surely affects the 2nd's position and this is why the 1st would need to get permission to subordinate the 2nd upon the recordation of the new mortgage/note.

This is just standard stuff.

[IBroke]

This is standard "non-bankruptcy" lien guidelines.

If you re-write the mortgage/note and need to record it... the recordation would be after any other liens. Since the "new" lien would be recorded after the second, the new lien becomes a subordinate to the 2nd. (The 2nd moves into the first position!) This is just the way liens work.

The real problem with a first being modified is that the "term" is changed. When the term changes, that surely affects the 2nd's position and this is why the 1st would need to get permission to subordinate the 2nd upon the recordation of the new mortgage/note.

This is just standard stuff.

Thanks!

[DeadManCrawling]

To be clear,

There is NO second on this mortgage. It is, apparently, wholly owned by BAC and not backed by any GSE.

I am still waiting for paperwork and will post details in a few weeks if/when the package arrives.

I am skepical. Sometimes these things seem designed to part the borrower from a lot more money before the foreclosure moves ahead anyway. Leaving a hopeful borrower screwed all over again.

We shall see.

Thanks for all the comments!

[hereforinfo]

Could you please explain that a bit further (incl. other sources) because I never heard of that from anybody else before.

Justbroke explained it very well. You can go directly to the source and read Freddie and Fannie's HAMP guidelines for servicers.

[howdidithappen]

All they wanted was a hardship letter and 2 months of bank statements? What are P&L statements? Did you send them other information previously?

[DeadManCrawling]

All they wanted was a hardship letter and 2 months of bank statements? What are P&L statements? Did you send them other information previously?

P&L are profit and loss statements (I am self-employed) from my business.

Yes. they requested the hardship letter and 2 months bank statements. I suspect they will ask for much more when we move forward.

[eddiep]

DMC

Praying this works out for you! Did you say somebody came to your house?

[eddiep]

Yea I think I remember someone else saying that they were working out a loan mod before they filed for BK and then after they filed the bank refused to continue with the mod.

I think it was me who said that they were going to pull the mod offer because of bk, but they didn't. They had changed their policy or the bk laws had changed and "apparently had some employee education issues". My loan modification continued and was completed while in active bankruptcy. BOA gave me a three month forebearance (that I didn't ask for but desperately needed), added this back into the principle balance, lowered the interest a little for the life of the loan and extended the terms back out to 30 years on my first and two "second" mortgages. This lowered my total payment by $1030 a month. The process was a NIGHTMARE! but they kept me in my home. My prayers were answered! I'm not a very religious person but I am praying for DMC and all the other people who are trying to keep their homes.

[PatientSteph]

Hello,
I'm Steph and I'm new to the forum. I've been looking around for months, learning so so much about the process of bk and other things. I finally decided to register today because this is the first post about something positive happening with BoA. I have been through the WORST 18 months of my life and I'm still in it up to my eyes. I'm going to try and keep my story short.

My mom has been fighting cancer since March 08 and I'm all she has. She came to live with us in May08 and I had no idea it was going to be forever. It's a huge burden both financially and emotionally. My husband lost his job of 6 years in Nov08 and has been unable to find a real job. He's been layed off twice. He's been doing odd jobs, lawns, etc to bring in some money. My mom has no savings and small income. Her medical bills are big and it's my mom's life.... so I have to help her. Bottom line is that we went from financially stable to near ruins in just a year.

We have been working with CountryWide/BoA since Jan09 for a loan mod. It has been absolutely ridiculous. They kept telling us one thing, then another, then another, then they lost our file, then they had a new dept., then the HOPE program was rolled out and I had to be "re-considered", and I qualified, then I didn't. We have been living in this suspended state.

My mom could be in the last months of her life, and I can't stay home to care for her because I'm the only steady source of income. We can't afford RN care for her, so my husband has to care for her while I'm at work. I didn't mean to go on and on...but it's a complicated and extremely stressful situation..and all along BoA has been dragging this out. Credit is ruined, self esteem gone, life sucks.

This grey cloud has taken all from me. I'm just a shell of who I was not just due to the financial harship, but because my husband can't find gainful employment, I am in no position to take a leave of absence to care for my mom so I work full time and take care of my mom who is bed bound. All I want is a chance to get back on track, and that chance has been held over my head 10 months.

But when I read this post about a success at BoA, I saw a glimmer of a better future.

BoA has been telling us for the past 3 months that it will be another 10-15 days. So all we can do is wait...and pray.

I apologize this was long. But I've not revealed the weight of our situation to anyone..until now.