Bank of America Second Lien Forgiveness. Was it a Good Choice?

by Yvette Betancourt

At the beginning of the summer, Bank of America announced a second-lien forgiveness to eligible homeowners.   The idea was to help homeowners who have defaulted on their home loans build equity so they no longer would owe more than their homes are worth.  Most importantly, it would encourage homeowners to continue making payments and stay in their properties.  Sounds like a heart-felt idea for distressed homeowners...right?

However, the forgiveness of the second lien has cause some challenges for qualified homeowners who are in the middle of a short sale.  Bank of America may have discharged the second lien but it is estimated to be fully "released" within 90 days.  For homeowners in the mist of a short sale, this timeframe is interfering with first lien closing deadlines with other banks and can cause a major delay in the short sale process.  

Another issue is that some borrowers will not see a benefit from the program because they would still be underwater after the second-lien has been discharged.  The program has helped 2,800 homeowners in the nation, totaling $199 million.  

Source: www.utsandiego.com