BofA to offer 30 percent principal reductions for underwater borrowers

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Bank of America is planning to forgive up to 30 percent of loan principal for homeowners whose mortgages are at least 60 days delinquent and who owe more than 120 percent of their home’s value, the company announced today. The program, aimed at borrowers with who are severely underwater on the riskiest kinds of loans — specifically, subprime loans and adjustable-rate mortgages — will target principal reductions as the first course of action in keeping struggling borrowers in their homes. The Obama administration’s Home Affordable Mortgage Program considers affordable loan payments to amount to no more than 31 percent of household income, and the bank said it would consider interest rate reductions if that target is not met after reductions in mortgage principal. Beginning in May, the bank expects to offer $3 billion in total principal reductions to 45,000 qualified customers. TRD