The $25 Billion Settlement With Mortgage Lenders: What Does It Mean To Homeowners?
On Thursday the five major mortgage lenders reached a $25 Billion settlement deal with the federal government to compensate homeowners for their abuses in the mortgage lending industry. The settlement with Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial (formerly GMAC) has three components that may help borrowers in distress:
1. Former Borrowers Who Lost Their Home to Foreclosure
These people may get $1500 to $2000 each as compensation for "improper" foreclosure proceedings.
Who is eligible? Borrowers whose mortgages were serviced by one of these five banks (notes could have been owned by Freddie Mac or Fannie Mae) and who lost their homes to foreclosure between 1/1/2008 and 12/31/2011. Note: Homeowners who lost their home through a short sale or deed-en-lieu agreement are NOT eligible.
A settlement administrator will send out a form for consumers to fill out if they believe mistakes were made in the processing of a loan modification application or during the foreclosure process. Including lost paperwork, or if a foreclosure action was undertaken while a loan modification was being considered.
Is this you? What should you do? Contact your former loan servicer and make sure they have your current address!
2. Borrowers Who Are Behind (Delinquent) and Who Are Under Water (owe more than you can get)
$10 billion of this settlement is supposed to go to these borrowers, to assist in principal reduction for first and second mortgages. Although many homeowners will still be underwater, it will provide in some cases enough relief to help homeowners stay in their home.
Who Is Eligible? If you are at least 30 days behind in payments, are in risk of default and have a mortgage held by one of these five banks or a private investor. Must be a mortgage of less than $417K and an owner-occupied dwelling. Borrowers who went through a loan modification but defaulted on it may still be eligible. Homeowners who are less than 20% under water are unlikely to be eligible. Anyone with a mortgage held by Fannie Mae or Freddie Mac (or another non-participating lender) will NOT be eligible. Private investors will still have the option of taking the home to foreclosure.
If you do NOT qualify, homeowners may be offered funds to move out of the home and to waive deficiency judgments on short sales.
Is this you? Call your loan servicer to find out who owns your loan.
3. Current borrowers who are underwater and unable to refinance
Under this category, $3 billion was set aside to help borrowers refinance at more attractive rates (not necessarily to the lowest rates available) on a case-by-case basis.
Who is eligible: Borrowers who are under water and whose loans are owned by one of the five banks AND are paying a mortgage interest rate in excess of 5.25 percent. If the borrower has been late in his/her payments in the past 12 months, has had their mortgage modified in the past 24 months, has a loan held by Fannie Mae or Freddie Mac, or has had a bankruptcy/foreclosure in the past 24 months are NOT eligible.
Is this you? Expect to be contacted in writing by your servicer.
For more information on this settlement, go to nationalforeclosuresettlement.com
If you wish to avoid foreclosure but wish to re-take control and salvage some of your credit with a short sale, please contact us online or give us a call today at 843-864-3777. Our team has a high success rate with short sales!