Bank of America Begins Implementation of
Principal Reduction Enhancement Under National
Homeownership Retention Program
Qualified Homeowners Who Are Severely Underwater May Earn Forgiveness of Some Principal Over Three
or Five Years
June 02, 2010 10:03 AM Eastern Daylight Time
CALABASAS, Calif.--(EON: Enhanced Online News)--Bank of America has begun implementation of an earned
principal forgiveness approach to modifying certain loans eligible for its National Homeownership Retention Program
(NHRP). The plan is being offered to homeowners who owe considerably more on their loan than the current value
of their home, when the loan is being considered for modification through the government’s Home Affordable
Modification Program (HAMP).
Among several enhancements to the NHRP announced in late March, the bank unveiled this innovative approach to
employing a principal reduction as the first step toward reaching HAMP’s affordable payment target of 31 percent
of household income when modifying certain NHRP-eligible mortgages – ahead of lowering the interest rate and
extending the term. The reduced principal balance will be a non-interest bearing forbearance amount, and the
homeowner may earn forgiveness of the forborne amount by remaining in good standing on payments.
The NHRP enhancement was implemented on schedule in mid-May with the mailing of the first letters notifying
customers who may qualify for the new program. Customers are required to submit required documentation of
financial information for consideration in determining eligibility and underwriting the modification plan. Upon
completion of these review processes, the first trial modification offers under the earned principal forgiveness
program may be ready for mailing in the second half of June.
NHRP-eligible loans include subprime, Pay-Option ARM and prime-quality two-year hybrid ARM loans originated
by Countrywide on or prior to January 1, 2009, if the amount of principal owed exceeds the current property value
by at least