According to documents filed in federal court Monday, Ally Financial Ã¢â‚¬" formerly GMAC Ã¢â‚¬" will offer principal reductions beyond what is required of the majority of the five banks in $25 billion the national mortgage settlement.[IMAGE]
While the general rule for principal reductions required through the settlement is to lower principal to no more than 120 percent of a home's value, Ally will offer reductions of as low as 85 percent in some cases where borrowers are considered likely to default.
Other homeowners with high-risk loans may receive reductions bringing their loan to 105 percent or 100 percent of their homes' current values.
Ally will offer a Payment Shock Relief program for underwater borrowers who are current on their loans but are locked interest-only or other ""high risk"" loans.
Some delinquent borrowers will also be eligible for principal reductions to bring their loans to between 85 percent and 105 percent loan-to-value ratios (LTV).
Ally has agreed to these extensive principal reductions ""[d]ue to the nature of GMAC Mortgage's servicing portfolio and the fact that it had already modified a significant percentage of its servicing portfolio prior to the settlement,"" an Ally spokesperson told ""Fox Business."":http://www.foxbusiness.com/news/2012/03/12/ally-financial-agrees-to-broader-principal-cuts-under-mortgage-settlement/
Bank of America also agreed to provide greater principal reductions than the 120 percent LTV standard. The servicer will bring principal down to 100 percent of homes' current values for about 200,000 borrowers.
Under the national settlement Ally will pay the least amount in comparison to the other four banks. Ally has agreed to pay $100 million in penalties to the government and $200 million in aid to borrowers.