Bank of America Completes $4.75 Billion in First Lien Principal Reductions

In the first five months since the national mortgage settlement was approved, Bank of America has completed more than $4.75 billion in principal reduction offers on first mortgages.

At the end of September, 30,000 homeowners were approved for trial modifications or had made the required three monthly payments during the trial period to convert to permanent modifications under the principal reduction program.

Also, the Charlotte, N.C.-based bank expects to have reached out to about 200,000 customers who are eligible to apply for a first-lien principal reduction. B of A is sending letters to these customers requesting the limited documentation necessary to determine final eligibility.

In order to meet the terms of the mortgage settlement agreement, B of A agreed to provide more than $7.6 billion in consumer relief through modifications of first and second liens and foreclosure avoidance solutions, such as short sales. But under the agreement, banks will not receive full dollar-for-dollar credit for all of the assistance provided to distressed customers, so this does not correlate to the $4.75 billion provided so far.

B of A expects to meet the total obligations within the first year of the three-year agreement because of several reasons. First, there is strong optimism because among borrowers who began their trial plan period at least three months ago, more than 85% successfully completed the process and qualified for a permanent reduction.

Another indication that the bank will meet its expectations is that monthly mortgage payments are dropping by an average of 35% for customers qualifying for the program.

Lastly, the average reduction in principal balance is more than $150,000 for customers who become eligible for the first lien principal reduction program.