13 Feb What the $25 Billion Bank settlement will do to homeowners
The five major banks agreed to settle the charge of robo signing foreclosure for $25 billion. The five banks are Bank of America, Well Fargo Bank, JP Morgan Chase, Citigroup and Ally Financial. Based on government announcement the following information is made available.
Question: What did the mortgage lenders and loan servicers agree to do?
Answer: The banks and servicers have committed at least $17 billion to reduce principal for borrowers who 1) owe far more than their homes are worth 2) are behind on payments. The amount of principal reduction will average about $20,000 per borrower.
Another $3 billion will go toward refinancing mortgages for borrowers who are current on their payments. This will enable them to take advantage of the historic low interest rates currently available.
In addition, the banks agreed to eliminate robo-signing altogether and to use proper and legal procedures when putting homeowners through the foreclosure process. They also agreed to end servicer abuses, like harassing delinquent borrowers for payments, and to include principal reductions more often in their mortgage modifications programs. In addition, nine other unnamed loan servicers may join the settlement later, and that would bring its value to $30 billion.
Loans owned or backed by Fannie Mae and Freddie Mac, however, are not part of the deal. The Federal Housing Finance Agency, which oversees the two government-sponsored mortgage giants, will not allow any balance reductions for loans insured by the companies under the settlement.
Question: Will the settlement improve the chance of a loan modification?
Answer: Yes. With the possible reduction on principal balance for homes that are underwater, the mortgage may become affordable to many homeowners.
Question: If my house is scheduled for trustee sale, is it possible to stop the sale and modify my mortgage?
Answer: Yes. To stop the trustee sale you need to file a Chapter 13 bankruptcy and then modify your loan afterwards.
Question: What should I do if I think I may qualify for a principal reduction or refinanced mortgage?
Answer: You should contact your lender/servicer and ask them to review your case. If your case is turned down you should seek the assistance of an attorney who do loan modification.
Question: If I take the money, what rights do I give up?
Answer: Individual borrowers do not give up any right to sue. As part of this deal, state attorneys general gave up the right to sue the mortgage servicers for foreclosure abuses arising out of the robo-signing scandal. However, they reserve the right to sue if they uncover improper acts when the loans were originated or when they were securitized.
Note: This is not a legal advice.