During 2009, many homeowners who were in default on their Bank of America home loan were able to obtain a Bank of America Loan Modification through the Making Home Affordable Plan. Millions of homeowners across the United States did the same thing at the bank where they had a mortgage. They have saved an average of $500.00 a month on their house payments. This has been a very welcome government program, coming at a time when foreclosure was at a rate never seen before.

However, one major problem had not really been adequately addressed by the President’s MHA program until April 2010. There were so many homeowners underwater or upside down in their home loans, owing much more than the market value of their home. The government programs now will have assistance to encourage banks to forgive part of the loan principal to allow people to get their mortgage into a reasonable equity situation.

Bank of America had already begun to do principal reductions for their borrowers who owed over 120% of the market value of their homes. This was not in conjunction any government programs, but was a plan they initiated themselves. The program had no limit on how far underwater a homeowner could be, but the amount written off would not exceed 30% of the loan amount. Wells Fargo had followed suit with their own plans to modify loans by reducing principal, too.

The government’s loan modification program will run through December 31, 2012. If you qualify for a Bank of America Loan Modification, you could get a reduced monthly payment. In addition, with government incentives to reduce principal on upside down loans, you could really obtain a much more favorable situation in the long term. Most importantly, you could avoid foreclosure and save your home.

By Ashlee Ashton