In what’s being called the largest joint federal -state civil settlement in U.S. history, the nation’s five largest mortgage servicers, Ally Financial/GMAC, Bank of America, Citi, JP Morgan Chase, and Wells Fargo, agreed to provide $25 billion to help borrowers who lost their homes to foreclosure and were victims of improper loan servicing and foreclosure practices.
Who Does the Settlement Help?
The settlement is for borrowers whose loans are owned by the participating banks named above and for homeowners who suffered foreclosures by one of them from January 1, 2008 through December 31, 2011.
This settlement won’t help very many borrowers who are behind on their mortgages because loans owned by Fannie Mae or Freddie Mac are not affected by this settlement and in Massachusetts over 60% of loans are owned by Fannie Mae and Freddie Mac. Even if your loan is being serviced by one of the banks above, chances are Fannie Mae or Freddie Mac are the actual owners. Homeowners should not assume that just because they have one of the above mortgage companies that their loan is definitely owned by them, too.
Who Owns Your Loan?
Banks Will Foreclose Faster Because of This Settlement
If you are not paying your mortgage the bank will foreclose faster now that this settlement is done. Since the robo-signing lawsuit was launched banks have been foreclosing much slower which is why the inventory of foreclosed homes on the market has gone down, but the amount of homes where the mortgage is not being paid has gone up.
Therefore we will see many more homes be foreclosed on this year. Borrowers who are behind on their mortgages need to understand that this settlement is not going to help them, it is only going to make their bank foreclose faster.
What Will Massachusetts Borrowers Receive from the Settlement?
This settlement will bring nearly $318 million dollars to help Massachusetts borrowers, with things such as with principal reduction, underwater loan refinancing, and transitional assistance.
“Fixing this foreclosure crisis is one of the most important things we can do to restore a healthy economy,” said Massachusetts Attorney General Coakley.
The five banks are expected to pay $14.6 million in cash payments to Massachusetts borrowers, $257 million worth of mortgage relief, and a direct payment of more than $46.5 million to the Commonwealth that will be used to assist homeowners.
Estimates say the settlement will help average homeowners receive roughly $20,000 in principal reductions. That may sound like a lot but it really isn’t. The average underwater homeowner is underwater by at least $100,000, so $20,000 is not going to help that much.
How Does The Settlement Help Homeowners?
The agreement provides some relief to thousands of homeowners who were foreclosed upon after the housing crisis.
It does not prevent homeowners from pursuing their own lawsuits if they want to.
After more than a year of investigation, the attorneys general from across the country, including Massachusetts Attorney General Martha Coakley, announced a probe into foreclosure practices following allegations that banks were using faulty documents to seize homes.
In December 2011, Attorney General Coakley sued the same five banks in this settlement and claimed they had engaged in unfair or deceptive practices including:
- Pervasive use of fraudulent documentation in the foreclosure process, including so-called “robo-signing”
- Foreclosing without holding the actual mortgage
- Corrupting Massachusetts’ land recording system through the use of MERS
- Failing to uphold loan modification promises to Massachusetts homeowners
Over the next six to nine months, homeowners eligible for the immediate cash payments, principal reductions and refinancing will receive letters from the settlement administrator.
For borrowers who lost their home to foreclosure between Jan. 1, 2008 and Dec. 31, 2011, a settlement administrator will send claim forms to persons eligible for cash restitution.
For more information on this settlement, visit NationalMortgageSettlement.com
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