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Irwin Law
Irwin Law, Attorney
Category: Legal
Satisfied Customers: 7404
Experience:  Lawyer & Real Estate Broker, 30+ years, foreclosure, land contracts, inheritance, probate.
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5 years ago BofA "modified" my mortgage. Ostensibly they

Customer Question

Hello - 5 years ago BofA "modified" my mortgage. Ostensibly they lowered my interest rate but actually calculated my payment by amortizing the loan over 40 years while leaving my maturity date at 20 years from the modification. At the maturity date I will still owe $179,000 after having "paid off my mortgage". While this has lowered my payments, the deferred principal will continue to accrue interest at the original interest rate that was killing me off to begin with.
I can find no resources on line for recourse. Is this modification legal? Fraudulent?
Submitted: 1 year ago.
Category: Legal
Customer: replied 1 year ago.
The structure is this: the original loan was $260k at 6.7%. They gave me the modification of:
201,000 at graduating interest over 5 years, starting at 2% then 3,4,ending at 4.87% fixed.
59,000 deferred, interest free, payable at the end of the loan.
201,000 amortized over 40 years instead of the 20 still open on the loan. The principal that is not being paid monthly because my payment is less than is amortized will accrue interest at the original 6.7% leaving me with $119,000 at the end of the maturity of the loan (20 years from the date of the modification), still due - PLUS the $59,000 "deferred principal" resulting in $179,000 due at the end of the term.
I can't even calculate how they did this!!
Expert:  Irwin Law replied 1 year ago.

I don't blame you for your confusion. The math involved in this is mind-boggling. But the restructuring is legal in that it preserves an investor's right to receive the money that they are contractually entitled to over the term of the loan. At the same time, the lowered monthly payment has permitted you to retain ownership of your home. The back end balance is an unpleasant fact of life, but it has to be dealt with. I cannot simply be written off, or down by the investor. As your financial situation improves, you can make additional principal reduction payments which will lessen the balance owed at the end of the 20 year term. You might also be able to refinance the loan at some point along the way, or at the end with regard to paying off the remaining balance. I hope that this information is useful and that you will assign it a positive rating, at no additional cost to you.