Should banks forgive mortgage principal?

Do you think other banks should adopt Bank of America’s new plan to help homeowners avoid foreclosure.

Bank of America, the largest mortgage servicer in the country, said Wednesday it will forgive up to 30 percent of some customers’ total mortgage balances, Associated Press reports. The homeowners must have missed at least two months of mortgage payments and owe at least 20 percent more than their home is currently worth.

Although the motivation for Bank of America’s announcement was to resolve legal problems, it has the potential of putting pressure on other banks to also forgive principal on loans that are in danger of failing, AP writes.

Up until now, nearly all mortgage relief programs have avoided forgiving the principal owed.

Do you think this new approach will work? Should it be expanded?

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88 comments Add your comment

TnGelding

March 25th, 2010
9:43 am

Sure, it will work for many, but it shouldn’t be necessary. Just adjusting the interest rate should suffice for most. True, they would still be under water, but eventually the homes will regain value. And the owners probably couldn’t live any cheaper anywhere else. They made their beds, let them sleep in them. A lesson hard learned.

JD

March 25th, 2010
1:11 pm

No. It’s just people that were irresponsible. Why reward irresponsible behavior? You watch TV and its all about showing out like those idiot Atlanta housewives. They don’t have any real money – all they have is debt and now the bill collector is coming.

oldtimer

March 25th, 2010
1:14 pm

Yes, if it helps homeowners and does not kill the bank…It is everyone’s interest to keep people in their homes and have them pay as they can and if they sell later and values have gained something could be worked out. As neighborhoods improve because of fewer foreclosures all should be winners.

AH

March 25th, 2010
1:14 pm

WHAT THE F:$*%$& if you enter into a contract you are responsible for that contract. If you can’t hold your end of the bargain up you should keep all the benefits. Let people fail, let companies fail.

Until we do this no one will succeed.

Bill from Cobb

March 25th, 2010
1:15 pm

I guess owning a home has become a human right just as health- care. I think we should provide cell phones, cable tv, lawn care, and fake boobs too. After all why should anyone have to work.
The same dead beats that are for this are also the ones for health-care. Obama should change his name to Robin Hood.

CEB

March 25th, 2010
1:15 pm

Makes me feel like a sap for paying my bills :(

Rufio

March 25th, 2010
1:17 pm

No, I don’t believe they should drop principal at first. They should look at the whole loan and get rid of all fees (late,attorney, inspection, paperwork,etc.). They should cut the past due interest in half and add it to the principal A new note should be cast and it should be interest only for 4 years. After 4 years, it can rolled into a new 30 -40 year note. The first payment is not due for 6 months. If they can’t get a plan together in 6 months then they have to put the house up for sale. No sale in 6 months…..Foreclose……..

No one should live for free…..However, these are hard times and foreclosures helps no one at this point.

DM

March 25th, 2010
1:19 pm

I agree with CEB! I feel for those hard working people who, at no fault of their own, lost their jobs and got into finacial trouble. I think if the banks are going to help, they need to help ALL. I struggle to pay my bills with this rough economy. I have had a major pay cut and had to find creative ways to pay my bills. Help me!!!!

BIll T.

March 25th, 2010
1:21 pm

While this is clearly a public relations ploy to avert some legal problems that Bank of America is trying to extricate themselves from…It can be good for “in-over-their-heads” homeowners. Kinda frustrating though….after making monthly payments (on time) and scrimping and saving for many years we finally paid off our mortgage with Bank of America. Do I get a “free pass go” check in the mail too?

A CONSERVATIVE--

March 25th, 2010
1:22 pm

NO….NO…NO…..THE BANK WILL NOT EAT THE LOSS…….OTHER DEPOSITORS WILL SUFFER…..& TAKE THE HIT.

Jeff in Roswell

March 25th, 2010
1:23 pm

Why do people continually get rewarded for bad choices and behavior?

Rana Cash

March 25th, 2010
1:25 pm

For a related AJC story, I’m looking for people who’ve kept the credit card payments current, but have missed mortgage payments. If that’s you, please email rcash@ajc.com. Thanks, Rana
Good question, Henry.

Linda Lee

March 25th, 2010
1:25 pm

to TNGelding who said “They made their beds, let them sleep in them. A lesson hard learned.”

Some of us struggling to keep our homes out of foreclosure are not careless “bed-makers.” Many homes are now in danger due to job loss and drastic income reduction. We did NOT buy more home than we could afford; in fact we bought a lesser home.

My husband is a homebuilder. 27% of construction workers are now unemployed. Many, like us, have been unable to find work for over a year and have cut every imaginable expense in order to scrape enough money together every month to make a mortgage payment.

Don’t judge or make an overall assumption until you have walked a mile in the shoes of someone trying to save their home.

ugaaccountant

March 25th, 2010
1:26 pm

It does make business sense to explore this, although not as an across the board situation. This is extremely tricky, as many people would love to take advantage of the situation. It will require serious research on each and ever loan modification. But it can be done, just like if someone was looking into a refinance deal or whatever. Banks should be willing to negotiate in good faith. Getting most of their loan back is better than holding yet another foreclosed home.

Holiday

March 25th, 2010
1:27 pm

Bill,
We are already paying for people to get free cell phones. If anyone is on welfare, food stamps or section 8, they qualify for a free cell phone with 68 minutes per month! Go to http://www.safelink.com…..it never stops!

Mary

March 25th, 2010
1:30 pm

I’ve never missed a mortgage payment and we definitely bought much less house than we could afford. When we bought, we thought about things like job loss in order to keep our payments affordable.

Having said that, I don’t have a problem with banks doing what they can do to keep people in their homes and making payments. So many people are out of work. And so many others were hoodwinked into buying homes they really couldn’t afford. The industry took advantage of the dumb and the greedy when it came to home loans. Even the dumb and greedy need a roof over their heads.

David S

March 25th, 2010
1:34 pm

Nobody’s reducing my principle. These banks are only able to do this because money is being stolen from everyone else to give to these banks so they can do this. That is what the bank bailout money was. They are not doing this out of the goodness of their hearts.

Frankly, most of these people should walk away from their houses and let the banks foreclose. They couldn’t afford these houses in the first place and they STILL CANNOT. Home ownership is not a right. Everyone can find a place to live. It doesn’t have to be a home that you own. Blame the media, the government, and most especially the democrats for getting people to believe that they should own a home. It is not for everyone. Especially not those who don’t have any money left or can’t save enough to keep the lawn mowed, the house painted, the roof maintained, etc.

sucker

March 25th, 2010
1:35 pm

Just call me a sucker for paying my bills and buying a house I can afford…..

Pat

March 25th, 2010
1:36 pm

This does sound like a good idea, but what about the people who are working, budgeting their finances, and cutting back on a lot of stuff. I have paid all my bills on time, but am I going to get help. NO!!!!! Due to less income coming into my household, I am struggling to make ends meet. Since I was able to purchase a home that I could afford, even in tough times, am I getting assistance, NO!!!!!!.
This just wants to me stop paying my house bill so I can pay cheaper later.

Myopinion

March 25th, 2010
1:37 pm

I think it needs to be a matter of did they buy a house they could afford and then lost their job or did they buy above their heads and then when values went up they took out a home-equity loan to buy toys. Each case needs to be looked at to see if the banks are helping those who did make good choices.

JD

March 25th, 2010
1:42 pm

If you do things the “right” way, why are you penalized in this world? Sometimes I think it were better to be a bum. No material possessions and just walk the earth with no shoes.

Michael

March 25th, 2010
1:45 pm

If they are going to reduce principal for some, they should be forced to reduce it for all. Why should the morons who bought houses they truly couldnt afford be given break, while those of us who purchased responsibly – but are now on hard times due to work-related situations – have to pay off our full loans.

Either help EVERYONE or help NO ONE.

Then again, this is what his holiness Obama wants – economic warfare.

World Be Free

March 25th, 2010
1:48 pm

Guess who is going to end up paying for this? Those of us who are responsible. This is like giving credit card relief for those who overspent on their cards.

Give relieve to people who lost their jobs or had an uncontrolable family crisis.

BuckheadBill

March 25th, 2010
1:50 pm

Sure—-BOA can give away their money because they know they’re “too big to fail” Obama will bail them out if they run short and have to cut bonus’ to CEO. The Obama administration has opened a can of worms and they are slowly eating our country. How sad.

shaniqua w.

March 25th, 2010
1:50 pm

they should only forgive african americans we been scruggling for way too long. thanks u obama.

Cher

March 25th, 2010
1:51 pm

We should miss two mortgage payments and get our mortgage reduced, too! Why should we be honest, hard-working people? It doesn’t pay. This country is destroying work ethic amongst Americans…..just like Obama and the Dems want.

Cammi317

March 25th, 2010
1:53 pm

Wow there are some really blissfully ignorant and mean-spirited people posting on here. Unemployment is at a record high because so many people have been laid off. Do you think that those families should lose their homes because they had to take on lower paying jobs or are currently collecting unemployment? Many things have happened leading up to this housing crisis and it is not all from people knowingly biting off more than they could chew. What would you do if your company laid you off tomorrow and you could not find another job? I am employed, but my home lost $40,000 in value this year and I am now upside down and could not refinance if I wanted to do so. Sh** happens.

sladersaan

March 25th, 2010
1:56 pm

Can I get a rebate for being responsible?

Tyrone

March 25th, 2010
1:58 pm

It’s the white mans fault. He be the one that tricked me intos buying my house.

Joel

March 25th, 2010
1:59 pm

I bet these people who are getting foreclosed on for the most part still have cable, cell phones, new shoes, etc.

Furious

March 25th, 2010
2:00 pm

@Tyrone – It’s not the white man’s fault you aren’t intelligent enough to read a contract. Blame that on your parents.

aquarius

March 25th, 2010
2:00 pm

Here we go again. People who try to be responsible get the shaft. Irresponsible people get a reward. What’s next? A helping hand with car payments for those who bought a car they couldn’t afford??

rtayl1

March 25th, 2010
2:03 pm

Any bank that received bailout money should be made to forgive the loans. If they do not the banks are truly getting over. They will eventually make a 300% profit. The bailout money, the house they will resale and the original mortgage that the foreclosed owner still have to payoff to get it off their credit.

Joquita

March 25th, 2010
2:05 pm

We needsa a bailz out likes de onez from Wall Stretz where they bailed dem white boys out. They needs to bail us outs to. Its Racist!

Rob

March 25th, 2010
2:05 pm

So let me understand this correctly. If I have paid the bank as I was SUPPOSED to do then I get not break. But if I failed to live up to my end of the loan, paying monthly, then you’ll give me a reduction.

When will those of us who do the right thing get rewarded?

commoncents

March 25th, 2010
2:07 pm

JD @ 1:42 – Shoes will now be partially subsidized for you and anyone that is in your position. Should you choose to not take advantage of the new lower price, The gov’t will be forced to lower the price more, at whatever cost to the rest of us is necessary. Should you still choose to do nothing about it and go shoe-less, shoes will be free and become mandated; failure to wear shoes will result in jail time and a free cell phone.

B

March 25th, 2010
2:08 pm

It’s time to stop rewarding bad behavior all around. These people eneterd into a contract and LEGALLY owe the money. They are victims of their own greed and stupidity.

Common Atlantan

March 25th, 2010
2:08 pm

I hate Monday’s!!!!!!!!!!

disgruntled

March 25th, 2010
2:08 pm

I see excuses as to why it is a good idea and it makes me sick. Nothing is guarenteed in life except death and taxes. ANYONE at ANYTIME could, get sick, loose their job, own a house that plummets in value. These are just some of the risks EVERYONE faces EVERYDAY and you should be responsible in ALL of the decisions in your life, and plan on how to take care of yourself and your family when faced with troubled times. If BOA wants to forgive principal they should offer it to ALL of their customers, this decision will only alienate their good customers and cause them to leave. As long as this is still a free country they can make whatever decision they want. I have 6 accounts with BOA 3 checking and 2 savings as well as a credit card without a balance and I will be closing all of them within the next day or two because I so strongly disagree with their decision.

MH

March 25th, 2010
2:09 pm

@ Linda Lee While I won’t ask you all the dirty details on how you got there in the first place, many of us are not going to have sympathy for your plight regardless of what you tell us. Sorry. I know for a fact that many banks are looking heavily at every troubled mortgage and in many cases the customer cannot be helped. More often than not it is some fault of their (homeowner’s) own as to why they are in the predicament they are in. More often than not, these people failed to properly plan for the “rainy day”, which is not the banks’ problem. Again, for the most part the banks hands are tied, AND the government is still calling the shots!

People need to stop believing the excuses – even those of job loss and health crisis. More often than not the personal finances of those individuals and families was a tightrope BEFORE the job or health problem. Believe me when I tell you that banks are trying to help homeowners, but the homeowners have not done the right things at all. Big rainy days funds, huge savings accounts, no credit card debt, good health insurance (even high deductible for catastrophe) – none of that stuff is there to show banks you’ve done the right things.

NO the banks should not forgive the mortgage principal. NO!

YardDawg

March 25th, 2010
2:11 pm

Why not? The reality is that irresponsible behavior is not isolated to many of these people’s actions when it came to improper planning when originally purchasing the home. Irresponsible behavior generally transcends all of these individuals behavior.

Case in point is the failure to a large degree of the ‘Making Home Affordable’ program. The number of mortgages reworked has fallen far short of the government’s goal not because of the willingness of lenders, but because 80% of original applicants fail to get off their bum and turn in the necessary paperwork. And on top of that, 30% of the approved loan modifications fall right back into delinquency.

So let BoA throw this program out there; most will be too lazy to turn in the paperwork or so irresponsible that they will fall behind again within months.

So whats next

March 25th, 2010
2:12 pm

No. I bought a home and paid 135,000 for it. Thats what I could afford and I am paying the mortgage every month like clockwork. I could have bought a home for 450,000 with a buydown and stupid financing but I didnt.

They bought it, they knew what the payments were to be and they knew that they could not afford it. For those who claim that one of the persons in their home is out of work, my answer to that is tough. One knows they dont put all their money into one thing. You should have never bit off more then a single paycheck in your home. Then if one of you gets laid off the other can cover.

Im tired of giving giving and giving. I will pay the price in higher taxes again and quite frankly I am tired of supporting everyone else with the money I earn on a daily basis. We need the fair tax so everyone in the country pays and not just the dedicated that gets up every day and earns their way.

NO NO NO NO MORE!

MMoore

March 25th, 2010
2:13 pm

NO!!! Why should only those who are NOT paying their bills get to have part of their debt obligation written off?? And who will be funding all of this? That would be the TAXPAYERS of this nation, which includes my family. I don’t want to pay for anyone else’s stupid choices or unfortunate circumstances.

Intownwriter

March 25th, 2010
2:13 pm

Yes, all banks should. None of the Federal dollars are making it to John and Joan Q. Public, and we’re the ones who are hurting worst.

MH

March 25th, 2010
2:16 pm

LOL commoncents

AMEN disgruntled

This is the same principal that the healthcare fight is based on. There are no guarantees in life!!!
People who are responsible tend to have health insurance and make sure they keep it. Responsble homeowners put money down and read the docs they sign. Everyone should have enough money saved for a rainy day. Responsible individuals are tired of the excuses wheather it’s a home or healthcare! No more excuses – take control of your life NOW!

TR

March 25th, 2010
2:18 pm

What a joke. The government gets paid by our taxes, the bank makes money by investing our money. No matter what you give away your taking it from others. For each penny that goes out a service has to be rendered (job). If people want help let them earn it. If you pick up trash or mend potholes there are plenty of ways to earn “assistance”. If you don’t care to earn. then you don’t need help. The way Obama is going there won’t be any incentive for people to be productive. What kind of society are we trying to create???

shaniqua w.

March 25th, 2010
2:22 pm

why should i have to pay ? me and my peoples are victim. white folks…. u never walked a day in a sistas shoes.

Tellin it like it is

March 25th, 2010
2:24 pm

I agree Atlantan!

Mondays are never on time and always complain.

rtayl1

March 25th, 2010
2:25 pm

What has to realized is there was no reason for all banks to raise the rates at the same time on these types of loans knowing the danger they would be putting the market in. This was a setup by the banks from the beginning. They knew the financial state of the customers based on the type of loan they had to get. Why raise the rate to (in some cases) that would double the monthly payment. Was it wrong for the homeowner to accept a risky loan getting a house the only way they could or was it wrong for the banks to raise the rates (not because they had to) to put the mortgages out of reach.

Furious

March 25th, 2010
2:25 pm

@TR – “What kind of society are we trying to create???”

That’s an easy one.

The Dems are trying to create a society SO dependent on the government that the politicians will have almost unlimited power.