In the first act of what appears to be a bailout for the American public, Bank of America announced that if you have a mortgage 20% greater than the value of your home, you will be entitled to a forgiveness program that can reduce your principal loan amount by up to 30%. The program works in two steps: Step one is an automatic reduction in your loan principal to equal the current value of your home. Step two requires the money removed to be a forbearance. If the homeowner can make on-time payments for the next five years, the forbearance amount will be forgiven. Of the 1.6 million mortgages Bank of America has issued, only 45,000 should benefit from this new policy.
If you’re one of the millions that are in this kind of situation but didn’t receive your home loan from Bank of America, you’re probably pretty upset that your lender has not adopted this very same policy. Considering the heat that the government is taking from others for this practice, there’s a good chance that this idea will spread to all lenders in the upcoming months. It’s estimated that 24% (11.3 million) of all the mortgages issued in the United States have negative equity, so considering the small percentage of randomized people this idea helps, you can expect this story to develop further.
Let’s take a look at the best personal finance articles of the week.
Do You Live in the Richest Country in the World? @ The Financial Blogger: Believe it or not, when you consider the GDP per capita (meaning per person), the United States is not considered the richest country in the world. It’s not even in the top five.
What Happens When a Bank Fails? @ Moolanomy: So far this year, 37 banks have failed. That brings the 12-month total to 177 meaning the chance a bank has failed in your area is a pretty good one. Ever wonder where they go?
Tricks Stores Use To Get Us To Overpay @ Frugal Dad: Have you ever noticed those cool displays that grocery stores build to showcase their on-sale items? There’s a lot more to the way their stacked than you think.
A Letter To The Future Me @ Suburban Dollar: If you had the opportunity to write a letter to the future you, what would you say?
Why Tax Deferral May Be a Sucker’s Bet @ Fiscal Geek: The amount needed for a c comfortable retirement was recently estimated to be $2 million. One way that you can get there faster is by contributing to your IRA and deferring your taxes on those contributions but the tax break might not be all it’s cracked up to be.
Weird Stuff That Hurts Your Credit @ MSN Money: Remember that episode of Seinfeld where Jerry didn’t return “Tropic of Cancer” for 20 years and was hunted by Joe Bookman, the library cop? Well what you didn’t learn from Seinfeld was that Jerry’s credit was hurt because of it.
Tax Scams and How The IRS Caught Scofflaws @ The Street: Have you ever wondered how the IRS can catch so many tax cheats when they deal with hundreds of millions of tax returns ever year? Inside are a few tricks to their trade.
Should College Athletes Be Paid to Play @ The Motley Fool: There’s always been a debate on whether or not college athletes deserve to earn a wage when participating in athletics and it will be always be my opinion that their education is reason enough to play for free.
And this past week, we also participated in the Carnival of Personal Finance.