While we have frequently discussed the recent upward trend of the South Florida real estate market, it is important to remember that, while the picture in some cases may be improving, many homeowners are still struggling. Florida was one of the hardest hit states during the housing meltdown, and a full recovery is far from complete.
With that in mind, recent news from Bank of America may indicate a ray of hope for those Broward County residents still experiencing the pain of the real estate market's bottoming out. Bank of America has announced that it will begin a mortgage loan modification program soon that is aimed at reducing the principal amount owed on mortgages. The program comes in the wake of the historic $25 billion settlement earlier this year between some of the nation's largest banks and 49 of the 50 states.
Although the program will have many prerequisites, such as income requirements and the avoidance of delinquent payments, Florida residents should begin to see notices of how the program will work in their mailboxes soon.
Reducing the principal amount owed on a mortgage will cause a drop in monthly mortgage payment amounts, as well as allow homeowners to build equity in their homes at a faster pace. It is easy to see Bank of America's goal as well: it is better to have customers actively paying on solid mortgage loans than it is to have customers struggling to make payments in last-ditch efforts to avoid foreclosure.
Initial reports of the principal reduction program appear to be promising, but also complicated. Floridians who believe they may qualify for the program will want to be aware of each of the legal options for ensuring the best outcome.
Source: Sun Sentinel, "Bank of America offers new loan modifications that reduce principal," Donna Gehrke-White, May 9, 2012