In February 2012, a joint effort by the Department of Justice and 49 State Attorneys General resulted in mortgage servicers being forced to repay some of the billions of dollars they bilked from consumers.
The agreement, called the National Mortgage Settlement, forces for the largest mortgage servicers: Ally/GMAC; Bank of America; Citi; JPMorgan Chase and Wells Fargo to refund $21.5 billion to consumers who were victims of deceptive servicing practices.
Some of the deceptive practices included widespread reports that banks were filing falsely-signed documentation for court proceedings in order to speed as many foreclosures through as possible.
There were voluminous complaints of wrongful foreclosures along with a variety of mortgage issues squarely caused by banks and loan servicers’ failure to properly assist and manage accounts of distressed borrowers.
What distressed borrowers must do
Make your request known. After being tossed through the maze of foreclosure, short sales, loan modifications and even bankruptcy, consumers are just plain fed up! Many of the government sanctioned programs designed to help homeowners failed miserable. President Obama’s Making Home Affordable is the poster child for failed mortgage assistance programs.
But do not let this opportunity pass you by. The National Mortgage Settlement could finally be the right help for consumers.
Relief will take a variety of forms, including:
- First and second lien modifications
- Enhanced borrower transitional funds
- Facilitation of short sales
- Deficiency waivers
- Forbearance for unemployed borrowers
- Anti-blight activities
- Benefits for members of the armed services
- Refinancing programs
Who can get help from the settlement
The National Mortgage Settlement requires the five largest mortgage servicers to provide loan modifications and reduce the mortgage principals in an amount of $17 billion. Mortgage servicers were required to begin notifying homeowners of these changes by letter starting in June.
As stated above the five largest mortgage servicers are:
Ally/GMAC
Bank of America
Citi
JPMorgan Chase
Wells Fargo
These major loan servicers must repay victims within 3 years or they could be forced to pay millions more in additional fines.
The main components of the settlement are:
(1) Borrowers in need of a loan modification, including first and second mortgages, are eligible for a principal reduction loan modification along with other forms of loss mitigation. Under the settlement, loan servicers are required to forgive debt up to $17 billion in principal reductions.
Eligible borrowers should have received letters offering principal reductions or other modifications in June 2012. The modification process will continue for approximately 3 years; but, do not wait to get notice. If you have a loan with one of the major 5 loan servicers contact them immediately.
(2) Borrowers who are current with their mortgage payments but owe more on the house than it’s worth, must be offered a refinance with lower interest rates despite the negative equity. This is expected to save homeowners $3 billion.
(3) Servicers must pay $1.5 billion to 750,000 borrowers who lost their homes to foreclosure between January 1, 2008 and December 31, 2011. This includes cash payments distributed to borrowers who receive and return a claim form. There is no requirement to prove financial harm; and, if you have a private claim or lawsuit against a loan servicer, participating in this cash payment will not affect your private claim.
Loans servicers not included in settlement
Borrowers who are not eligible for the National Mortgage Settlement can seek assistance at:
www.makinghomeaffordable.gov
www.independentforeclosurereview.com
Resources for Fannie Mae or Freddie Mac can be found at: www.fanniemae.com/homeaffordable
www.freddiemac.com/avoidforeclosure
Keep in mind the agreement allows loan servicers 3 years to execute one of the above solutions, as such, borrowers may not immediately know if they are eligible for relief under the National Mortgage Settlement.
Oklahoma borrowers are not eligible for any relief directly aimed at homeowners because Oklahoma elected not to join the settlement.
Don’t miss out
It is understandable that “mortgage fatigue” has set in but don’t miss out on this opportunity for resolution. It’s been 5 long years since the housing bubble burst but the debacle now has a brighter outlook.
According to a progress report released August 29, 2012 by the Monitor of the National Mortgage Settlement banks have successfully completed the following:
- Overall, 137,846 borrowers received some type of consumer relief during this period totaling $10.56 billion, which, on average, represents about $76,615 per borrower.
- 7,093 borrowers successfully completed a first lien modification and received $749.4 million in loan principal forgiveness, averaging approximately $105,650 per borrower.
- An additional 5,500 borrowers received forgiveness of pre-March 1, 2012 forbearance of approximately $348.9 million, representing an average of about $63,445 in forgiveness per borrower.
- Second lien modifications and extinguishments were provided to 4,213 borrowers, representing approximately $231.4 million in total relief. The average amount of relief for borrowers whose second liens were modified or extinguished was approximately $54,930.
- Servicers refinanced 25 22,073 home loans with a total value (unpaid principal balance) of $4.9 billion. The estimated annual relief provided to borrowers is approximately $102.8 million resulting from an average annual interest rate reduction of about 2.1 percent. On average, the estimated annual interest savings to each borrower will be approximately $4,655; or $388 monthly.
- In addition, 74,614 borrowers had either a short sale26 completed during this period, in which the Servicer agreed to a sale of a home for an amount less than the principal balance on the mortgage, or the lender agreed to accept a deed in lieu of foreclosure, waiving any unpaid principal balance in either case. The total amount of this type of relief approximated $8.67 billion, averaging about $116,200 per borrower.
- Through the various other consumer relief programs pursuant to the Consent Judgments, the Servicers provided $458.8 million in relief to 24,353 borrowers. The average amount of relief of these other programs was $18,840 per borrower.During the same period, first lien modification
The numbers have not been substantiated and cannot, at this point in time, be used to estimate the extent of the mortgage servicers’ satisfaction of the 20 billion settlement.
The bottom line is that borrowers who fail to take advantage of principal reductions and loan modifications are letting the banks off easy…again. Don’t miss out on the settlement. Visit the National Mortgage Settlement for more information.
