Perhaps in a move to lose in the first round of Consumerist’s Worst Company In America tournament, Bank of America announced today that it plans to offer around $3 billion in loan forgiveness to about 45,000 homeowners.
For some homeowners currently owing more than 120% of the value of their home, BofA will be offering an “earned principal forgiveness” of up to 30%.
The forgiveness plan, which starts in May, is intended primarily for homeowners with adjustable-rate mortgages. Homeowners with 30-year fixed-rate mortgages are not eligible.
BofA’s approach differs from many current loan-forgiveness plans by looking at reducing the principal instead of lowering the interest rate.
Eligible homeowners will have the opportunity to reduce the principal on their loan by up to 30% if they continue to make payments on time. The goal is to bring the principal value of the loan in line with the actual value of the home over that period.