Banks will be required to modify second liens that sit behind firsts “at least”. So this guarantees banks will also focus on borrowers where they do not have second lien exposure, and this also makes the settlement less helpful to struggling homeowners, since borrowers with both second and first liens default at much higher rates than those without second mortgages.
Nevada and Arizona on the Countrywide settlement suit, were given relief. Their alleged failure to comply with the prior settlement is now rectified. This move proves that failing to comply with a consent degree has no consequences but will merely be rolled into a new consent degree which will also fail to be enforced. These cases also alleged HAMP violations as consumer fraud violations and could have gotten costly and emboldened other states to file similar suits not just against Countrywide but other servicers, so it was useful to the other banks as well.
The $25 billion foreclosure settlement unveiled Thursday is expected to help many borrowers who are struggling to make their loan payments, owe more than their homes are worth or have lost their homes to foreclosure.
Who does the settlement cover? The settlement covers borrowers who have loans that are serviced by one of the five big banks: Ally Financial Inc./GMAC Mortgage, Bank of America Corp., Citigroup Inc., J.P. Morgan Chase & Co. and Wells Fargo & Co. These banks handle payments on 55% of U.S. mortgages, according to Inside Mortgage Finance.
My mortgage is with one of these banks. How do I know if I qualify for help? It’s going to take some time to figure that out because the settlement has so many wrinkles.
What if my loan isn’t with one of the banks? For now, the settlement covers only the five big banks. Government officials hope to strike a similar deal with nine additional banks.
How long is it going to take for me to get help? Government officials advise borrowers to be patient. Over the next 30 to 60 days, settlement negotiators will pick an administrator to handle the logistics of the deal. Over the next six to nine months, the administrator, attorneys general and mortgage servicers will work to identify which borrowers get help. Servicers expect to begin reaching out to borrowers in the coming weeks, but they have three years to provide the required help.
How will I find out if I qualify? Borrowers will get letters from their mortgage company. Each of the five servicers also has a website and a toll-free number for borrowers to get more information. Government officials are encouraging borrowers to contact their mortgage company to see if they qualify for aid.
What are the rules for the principal reduction program? To qualify for a principal reduction, borrowers have to clear several hurdles. For one thing, borrowers have to be behind on their payments or at “imminent risk” of default. The owner of your loan also makes a difference. Most of the principal reductions are expected to go to borrowers whose loans are owned by the banks, though some borrowers whose loans were packaged into securities may also qualify. The settlement calls for principal reductions on both first and second mortgages.
The deal doesn’t cover loans owned or backed by Fannie Mae or Freddie Mac, the government-controlled mortgage companies.
What about the refinance program? The refinance program applies only to loans owned by the banks. Also, borrowers have to be current on their loan payments and owe more than their home is worth. The interest rate on loans can be reduced to as low as 5.25%.
I’ve already lost my home to foreclosure. Can I get any help? Borrowers who were foreclosed on between 2008 and 2011 are eligible for cash payments. The amount of the payment will depend on how many people file claims, but is expected to be around $1,500 to $2,000.
How do I file a claim? The settlement administrator will mail notices to eligible borrowers once the process is up and running. Borrowers will have to fill out a simple form, but won’t have to prove they were foreclosed on and shouldn’t have been. Borrowers who are concerned they will be hard to locate can also contact their state attorney general.
That doesn’t sound like a lot of money. Shouldn’t I get more money if I was foreclosed on and shouldn’t have been?
Government officials say they wanted to create a streamlined process that would quickly get aid to borrowers. Borrowers who think they have been wronged can still file a claim with bank regulators or pursue other options.