Bank of America is Offering To Pay Off Second Mortgages??? |Carson| Leesa Hammond

Bank of America is Offering To Pay Off Second Mortgages?| Carson| Leesa Hammond

As part of the National Mortgage Settlement, Bank of America announced on Friday that it is in the process of  mailing approximately 150,000 letters to their pre-qualified homeowners offering to cancel their second mortgage.  The intention of Bank of America is to help improve the financial position of the homeowner by decreasing their monthly payment obligations and potentially creating an equity position in the property. Bank of America began mailing these notices to their qualified borrowers in July and will continue through December 2012. The letters will notify eligible homeowners that the full balance of the second lien mortgage will be forgiven and the lien removed and cleared.  The borrower does have the option to call the bank to decline the offer within 30 days of receiving the letter.    Hmm... isn't that interesting.

What is the criteria to have the second mortgage forgiven?

  • Mortgage must be owned and serviced by Bank of America
  • Eligible borrower must be severely delinquent
  • Second mortgage must meet certain threshold of delinquency or property value criteria
  • Does not matter who owns and services the first lien mortgage
  • Only borrowers who receive the mortgage elimination letters are eligible

Downsides for the borrower:

  • Unless you received second lien mortgage forgiveness letter, customers can not request to be part of the program
  • If the borrower is currently in foreclosure the elimination of the second mortgage will not stop the foreclosure from proceeding
  • Possibility of a tax liability, there are some exceptions  – always check with your tax advisor

Good news:

  • Bank of America will report the account paid and closed on the borrower’s credit report
  • Bank of America will NOT pursue the homeowner for a deficiency judgment

Bank of America will continue to help customers who are in need of assistance with their mortgage. Contact Bank Of America's customer call center or by visiting them on the web to find out about other available programs.

Leesa Hammond

Century 21 Amber

(310) 853-2998

Views: 1079


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Comment by Judi Fiolle on October 28, 2012 at 5:28pm

I have a question about this. I just got a short sale today that has a HELOC(2nd lien) from BofA on their house. The 1st was sold off to another servicer. They filed BK and it was discharged in August so they have not received a NOD or any foreclosure or debt relief information. They stopped being able to pay their mortgage this last Jan. How do Iyou suggest that I approach BofA to see if they qualify for the debt relief? I am thinking that I can just call customer service but I am not sure. I might have to initiate on equator for the 2nd lien first. What do you think their chances are with this one? If I can get this 2nd lien wiped out then I think we can complete a regular sale on the 1st and not have to ask for a short sale on this 1st lien. Thanks

Comment by DiOndra Anderson on October 10, 2012 at 3:12pm

My sister received her letter last Friday.  I was so elated for her, especially due to the fact she is being relieved financially after being diagnosed with breast cancer.  This is truly a blessing for her.

Comment by James W. McCormack on October 10, 2012 at 2:25pm

Interesting.  Michael Blue: thank you for your detailed accounting of real life experiences with these forgiveness letters.

Comment by Becky Flowers on October 10, 2012 at 12:58pm

I had a client call me about this thank you for posting. Great info!

Comment by michael blue on October 10, 2012 at 12:52pm
September 30, 2012

The New York Times

Copyright 2012 The New York Times Company. All Rights Reserved.

GREETINGS, unhappy homeowners! Here's some wonderful news:

''We are canceling the remaining amount you owe Chase!'' says a letter that JPMorgan Chase sent recently to thousands of home loan borrowers. ''You are approved for a full principal forgiveness of your Home Equity Account,'' says another, from Bank of America.

Jackie Esposito, of Guilford, Conn., got a letter like that. But she wasn't elated -- because she doesn't owe the money anymore. She and her husband filed for bankruptcy three years ago. The roughly $64,000 they owed Chase has been legally wiped out.

What's going on?

Cast your mind back to February. Five of the nation's big banks, including Chase and Bank of America, agreed to pay $25 billion to settle state and federal claims over questionable mortgage practices and promised to work harder to help borrowers who were in trouble. To prod the banks, the government said it would give them credits against the amounts they agreed to pay.

So, to the ire of customers who couldn't get banks to work with them before, banks are now forgiving debts that no longer exist.

''When I got this letter that said they were going to relieve our debt, I just about fell over,'' Ms. Esposito said last week. ''You can't forgive a debt that you're legally unable to collect.''

Others have received similar letters about phantom debts. A borrower in Florida received word this month that Chase was erasing $190,065.10 of debt that had already been wiped out. Bank of America told a Virginia resident that a $231,767 home equity loan was being forgiven, even though the debt was discharged last May.

Neil Crane is a lawyer in Hamden, Conn., who represented Ms. Esposito and her husband in their bankruptcy. He says four of his other clients have recently received letters from banks claiming to forgive discharged debt.

''I never thought in my wildest dreams that the banks would do this properly,'' Mr. Crane said last week. ''But I think it's really wrong to be foreclosing on mortgages you don't own and relinquishing debt you don't own.''

It's bad enough that these letters are inaccurate. But even worse are the tax problems that they may create for people like Ms. Esposito. In most cases, the Internal Revenue Service considers debt that is forgiven to be taxable income. One exception occurs in bankruptcy; when a debt is discharged, it is not taxable.

But the letters sent by Chase and Bank of America clearly warn that the forgiveness will be reported to the I.R.S. If so, these borrowers may have to prove that the banks erred in claiming to have forgiven the debts.

I ASKED spokesmen for Chase and Bank of America how they could forgive debts that no longer existed. Both gave the same unsatisfying answer. Very similar letters had been sent, both banks said, to two very different types of borrowers. One set of borrowers has outstanding debt that the banks are offering to forgive. The other set has had their debts discharged in bankruptcy, but the bank still holds a lien against their properties. Releasing the liens provides a benefit to borrowers when they go to sell their homes, and both banks said the letters were intended to notify borrowers whose liens were being released.

Why not take care to write letters specifically tailored to each borrower's situation?

Dan Frahm, a Bank of America spokesman, said the bank would work on clarifying what was in the letters to borrowers. And, late Friday, the bank put a more extensive description of the forgiveness and lien release program on its Web site. Not a bad idea, since nowhere does Bank of America's letter discuss releasing the lien. Mr. Frahm estimated that 12,000 Bank of America customers whose debts had been discharged had received these letters.

Tom Kelly, a Chase spokesman, conceded that the bank ''may have caused some confusion for customers.'' Its letter does note that the bank is releasing the lien on the property.

But even this is incorrect in Ms. Esposito's case, Mr. Crane said. Her lien was actually eliminated back in 2009, during her bankruptcy proceeding.

All of this made me wonder: are the banks' forgiveness letters a way to gain credits for debts these institutions are improperly claiming to have extinguished? The banks say no.

But Chase appears to be claiming to release a lien on Ms. Esposito's property that it does not hold. And under the mortgage settlement, it could receive a credit.

So I asked Joseph A. Smith Jr., a former banking regulator in North Carolina who is monitoring the settlement, how he planned to vet the banks' claims of relief provided and credit earned. For example, how will he ensure that institutions do not receive credit for releasing liens that have been eliminated?

''We will review compliance with this requirement as we will with all of the consumer relief requirements,'' Mr. Smith said, ''through review of the corporate records relating to such transactions.''

Good luck with that.

AS for Ms. Esposito, she said she found the bogus loan forgiveness letter from Chase especially upsetting because of the years she has spent trying to have the bank modify her first mortgage. She pays 9 percent on her loan and cannot refinance it into a lower-rate mortgage, given her recent bankruptcy.

Chase won't help her modify her loan, Ms. Esposito said, but it is happy to help by forgiving a loan that has already been discharged and releasing a lien that is already gone.

''There is no chance that this group of institutions can help homeowners,'' Mr. Crane said. ''They should not be in charge of fixing problems they helped create.''
Comment by michael blue on October 10, 2012 at 12:47pm
Careful! The $25 billion settlement levied against the five lenders earlier this year Provide certain provisions for lenders must follow. The lenders received credits when performing task But sneaky BoA is added again, They are forgiving second mortgages On second mortgages that may have already been written off or discharged! I would advise everybody to Google this as it is out there and read the articles for yourself. Somehow they're getting away with it.
Comment by Dea Froggatt on October 10, 2012 at 12:40pm

Great article!  I am sharing this as well with my SOI.

Comment by Paul Antonelli on October 10, 2012 at 11:12am

I posted this on my blog last week, It Is Real.

Comment by Dawn R Clark on October 10, 2012 at 11:09am

BofA sold the 2nd to SRG while in the middle of a cooperative short sale transaction with an approved offer. I had to go and negotiate with the 2nd as well after the fact. I didn't realize they sold the 2nd to another company until the title report was ammended. I wonder how many people will actually get these letters.

Comment by Jacqueline Trump Hockenbury on October 10, 2012 at 11:02am

Yes, this is great news for short sale agents.  I have a short sale in process that boa forgave the second mortgage already, which will change the negotiating factor with the bank.  So happy for the people that are in short positions, that can now get a realistic offer on their property and get their transaction to the table!!!!  Good job boa!!!!


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