Many of my clients have asked about the recent settlement by several of the biggest mortgage lenders and what it could mean for their bottom line. This is a historic settlement, representing the largest consumer financial protection settlement in history. What do you need to know about the $25,000,000,000 settlement?
The five lenders involved in the settlement include Ally/GMAC, Bank of America, Citi, JP Morgan Chase, and Wells Fargo. The settlement provides relief for three categories of homeowners:
1. Loan modifications, including principal reduction of both first and second mortgages. Banks must provide up to $17 billion in principal reduction and other forms of loan modification.
2. Homeowners who are current on their mortgages, but are upside down in equity. Borrowers in this category can refinance at today’s historically low interest rates. Up to $3 billion of the settlement is targeted to this segment of borrowers.
3. Borrowers who lost their homes to foreclosure. Up to $1.5 billion of the settlement will go to 750,000 former homeowners. These claims are estimated to be approximately $2,000 per household. Further, these individuals may continue with their private claims against the banks and they retain their right to participate in future reviews–so they can pursue future action against their former lenders.
There is no cost to homeowners or borrowers to participate in the settlement.
Settlement negotiators will be selecting administrators to oversee the settlement, handle logistical details, and monitor compliance with the terms of the settlement. This step of the process is expected to take 30 to 60 days.
In the following six to nine months, three groups–the attorney generals of the 49 states (Oklahoma is not participating), the mortgage servicers, and the settlement administrator–will identify homeowners eligible for a settlement. Depending on which category the individuals fall in, that settlement will be in the form of immediate cash payments, principal reduction, and refinancing.
Eligible homeowners should be contacted by the five participating banks. However, individuals who are interested or concerned may wish to initiate the process by contacting the banks for more information.
• Ally / GMAC: 800-766-4622
• Bank of America: 877-488-7814
(M-F 7:00 am to 9:00 pm Central Time and Saturday, 8:00 am to 5:00 pm)
• Citi: 866-272-4749
• JPMorgan Chase: 866-372-6901
• Wells Fargo: 800-288-3212 (M-F, 7:00 am to 7:00 pm Central Time)
If you lost your home due to foreclosure between January 1, 2008 and December 31, 2011, a settlement administrator will be in contact regarding restitution. Some people may be difficult to locate, perhaps because they’ve made several moves and/or they don’t have a permanent place of address. Those people can contact their state’s Attorney General’s office. If you’re not sure who that is, go to www.naag.org and click on “The Attorney General”. Scroll to the map of the United States, and hover over the black square located on your state. The contact information for your Attorney General will appear in a pop-up box.
It’s important to note that the settlement applies only to loans currently owned or serviced by the five participating banks. If a loan is currently owned by Fannie Mae and Freddie Mac, an individual is not eligible under the terms of the settlement.
Is your loan held by Fannie Mae or Freddie Mac? Find out by visiting these two websites or give me a call at 425-213-3700: www.fanniemae.com and www.freddiemac.com.
If a loan is held by one of these organizations there are links on the site that direct individuals to information about programs they may be able to participate in. This toll-free line (1-888-995-4673) also offers additional information.
Additional resources on the mortgage settlement can be located at: www.nationalmortgagesettlement.com, www.HUD.gov, and Department of Justice article.
Note: Source material for this article came from www.nationalmortgagesettlement.com.