Bank of America has kicked off a program forgiving thousands of homeowners portions of their mortgages, the bank says in a statement.
Qualifying homeowners could see monthly savings of up to 35 percent on mortgage payments, with principal balances cut by an average of $150,000 according to New York Times reports.
The program forms part of a $25 billion settlement agreement earlier this year with 49 state attorneys general and other federal authorities probing abuses over the handling of foreclosures at several banks.
"Building on home retention and payment assistance programs already in place, we are meeting our obligation to deliver this additional relief to our customers following the completion of the recent global mortgage settlement," Ron Sturzenegger, Legacy Asset Servicing executive, says in the statement.
"To the extent principal reduction and other modification tools help us turn mortgages headed for possible foreclosure into long-term performing loans, it will be positive for homeowners, mortgage investors and communities."
Bank of America began making principal reduction offers in March, initially concentrating on homeowners who were already in the modification review process.
Under that initiative so far, about 5,000 trial modification offers have been mailed, providing a potential total of more than $700 million in forgiven principal.
Homeowners are required to make at least three timely payments before the modification can become permanent, the banks says.
The housing sector, whose demise threw the country into recession, continues to drag on recovery, with many Americans underwater.
Some experts say despite signs the sector may be bumping along a bottom, full recovery is a long way off if it ever even comes at all.
"I worry that we might not see a really major turnaround in our lifetimes," says Yale economist Robert Shiller, co-designer of the S&P/Case-Shiller Home Price Index, according to Reuters.
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