Many of you may have seen the recent big bank settlement in the news. It is still in its early stages and the information is somewhat limited. However, here are some of the quick facts:
The $26 Billion Foreclosure Settlement: What you need to Know
The Settlement was initiated based upon a fraud lawsuit for robo signing and other foreclosure fraud. (It’s not legislation so Obama should be getting no credit).
The Settlement was between the fed attorney general, 49 states attorney generals’ (Oklahoma did not participate), and five banks:
Bank of America
JP Morgan Chase
Thus, if the client’s mortgage is not owned or serviced by the above five mentioned banks; they will not be receiving any relief.
The settlement resulted in a $26 billion dollar agreement; funds dispersed as follows:
$5 Billion in direct cash penalties ($1.5 Billion to homeowners directly affected by the fraudulent activity).
$17 – $20 Billion will be applied to loan principal reductions.
750,000 homeowners will receive a $1,500 – $2,000 check for foreclosure that took place between January 2008 and December 2011.
Remaining funds go to state governments to assist mortgage foreclosure alternative programs.
Who gets what money and when?
The direct cash penalties go to mortgages that were found to have direct fraudulent activity; they will receive notice in the upcoming 2 months.
Those who receive principal loan reductions must be on the brink of default, underwater (home is worth less than they owe), and still current on payments.
Those that receive the checks must have been foreclosed between January 2008 and December 2011. 750,000 people only! They will be chosen and notified in the upcoming 6 months by receiving a claim form in the mail.
What are the banks doing?
Probably nothing! The agreement gives them 3 years to disperse the funds. Within the next six months those five banks are supposed to set up committees who will handle the selection and criteria for qualifying mortgages that receive the settlement aid.
In the future:
HUD secretary is currently working on a settlement with nine other banks, so we will watch for that. He says it will result in “no more lost paperwork, no more excuses, and no more runaround,” from the banks. I doubt it!
Obama did draft a proposed legislation which is supposed to give every foreclosed homeowner the opportunity to be considered for a refinancing or loan modifications, but that legislation is still in Congress and not yet passed.