Let me first start by pointing that this latest episode of 'mortgage help' coming from Washington has received lukewarm reviews. The rap has been that this is once again too little too late and will not help very many homeowners. To make matters worse, borrowers won't know if they are even eligible for help for as long as two to three years (the period of time it is estimated for the settlement to be implemented).
- Over the next 30 to 60 days, settlement negotiators will be selecting an administrator to handle the logistics of the settlement and monitor compliance.
- Over the next six to nine months, the settlement administrator, attorneys general and the mortgage servicers will work to identify homeowners eligible for the immediate cash payments, principal reductions and refinancing. Those eligible will receive letters.
- Loans owned by Fannie Mae or Freddie Mac are not impacted by this settlement
Let's take a look at the highlights:
1. States Participating
49 states are participating (all but Oklahoma) in what is a settlement involving the nation's five largest mortgage servicers. This includes Bank of America, JPMorgan Chase, Citibank, Wells Fargo and Ally Financial. Smaller mortgage servicers will be able to join the settlement later. Keep in mind that for the purpose of determining if you can benefit from this settlement it is not as important who your lender is but who is your servicer (the organization that collects the monthly payment).
2. Purpose Of The Settlement
The concept behind the settlement is to require the mortgage servicers to compensate borrowers for their misdeeds. This most notable issue is the slew of allegations relating to the foreclosure process. Lost documents, forged documents, robo-signers, the whole list of 'sins' of the mortgage processors is rolled into the settlement. It is important to note that individual borrowers still retain the right to file their own lawsuit to pursue their legal claims individually.
3. How You May Benefit
Those That Have Already Lost A Home To Foreclosure
If you lost your home to foreclosure between 2008 and 2011 you may be entitled to receive compensation. The amount of money that is expected to be paid out to those that lost their home to foreclosure is estimated to be $1,500 to $2,000. It is not clear what the requirements will be to receive this benefit. Early information on this suggests that you will have to provide some evidence that you were a victim of mortgage processor abuses. So, simply having lost your home to foreclosure in and of itself will not entitle you to a payment.
Individuals Underwater On Their Mortgage
If you owe more on your mortgage than your home is worth you may be eligible for a principal reduction that would make refinancing possible. The key word here is may. Just as with these prior mortgage relief programs there appears to be quite a long list of requirements. Frankly, I was unable to make sense of them by the deadline for this article. So, as with all of these programs it does not hurt to make a phone call to your mortgage servicer to find out what help you may be eligible for. Who knows, you may fall into the small percentage of people that will get some real help here. The other variable here is that the states will be able to decide how to implement the distribution of the funds. For example, in Wisconsin the Governor has decided to take a large chunk of the money from the mortgage settlement and use it to pay down the state's debt rather than giving it to homeowners.
Banks Coming Up With Their Own Solutions
Without any government mandate banks have been coming up with their own solutions as well. I read an interesting article about banks paying people to walk away from their homes.
All of us financial writers want to produce an article with a list of bullet points containing black and white information when these programs are unveiled. The truth is that this may be more akin to one of those car dealer promotions where 10,000 people receive a key in the mail and only key will start the car being given away. I guess if you live near the dealership and are available on that day it would not hurt to see if you have the winning key. Similarly, there is some chance that this latest round of relief may be the answer to your mortgage dilemma.
1. Check out the official website for The Mortgage Settlement
2. Contact your state attorney general to see what benefits you may be eligible for as this will vary by state.
3. Continue to try and work out a deal with your mortgage servicer irrespective of whether this settlement applies to your or not. While it is true that only a small percentage of homeowners are getting help from these programs, some are. Those that are getting mortgage modifications are persistent and tireless in their efforts to do so. While there is no guarantee, pursuing these programs gives you a chance, and I guess in today's economy that is better than no chance at all.
Helping you make the most of God’s money!