Bank of America is sending out letters to potentially thousands of struggling South Florida homeowners to let them know they may be eligible for a reduction in their loan balance that may save them up to 30 percent in monthly payments, the lender announced Tuesday.
The letters will go out to more than 200,000 mortgage holders nationwide, with the first to arrive this week, the bank said. However, most of the letters will be mailed by the third quarter, that starts July 1.
The latest loan modification offer is part of a $25 billion settlement involving Bank of America, four other major banks, 49 state attorneys general and federal officials.
Bank of America officials said they had no immediate number of how many South Florida mortgage holders would be sent the letters. "What I can tell you is that the heaviest concentration is in California and Florida, the largest of the hardest hit states," said Jumana Bauwens, a spokeswoman for Bank of America Home Loans.
About 19,000 South Florida homeowners with Bank of America mortgages were at least 60 days late, Jessica Garcia, vice president for the bank's national mortgage outreach, said last month.
To be eligible for the new loan modification, the South Florida homeowners must have been at least 60 days behind on their payments on Jan. 31, 2012. They also must owe more on the mortgage than their home is worth today.
Their monthly payment – principal, interest, property taxes, insurance and any homeowner association fees – also has to total more than 25 percent of the family’s gross household income. "A key goal of mortgage modifications is to provide an affordable monthly payment, based on borrower’s ability to pay," according to a Bank of America statement released Tuesday.
And to be eligible for the latest loan modification offer, homeowners should have loans owned and serviced by Bank of America -- or serviced for another investor that has given the bank the authority to make the modifications.
Bank of America began reducing the principal on some home loans in March, first granting the reductions to homeowners already in a modification review process.
"So far under this early initiative, about 5,000 trial modification offers have been mailed, providing a potential total of more than $700 million in forgiven principal," Bank of America officials said in a release.
The homeowners are required to make at least three payments on time before the modification can become permanent, the bank said.
"To the extent principal reduction and other modification tools help us turn mortgages headed for possible foreclosure into long-term performing loans, it will be positive for homeowners, mortgage investors and communities," said Ron Sturzenegger, a Bank of America Legacy Asset Servicing executive.
In South Florida, Bank of America has seen a declining number of delinquent mortgages -- from about 30,000 last June to 19,000 now. That mirrors a national downward trend, according to a recent U.S. Department of Housing and Urban Development report.
For more information, customers may call Bank of America at 877-488-7814.
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