The federal government reached a landmark $25 billion agreement today with the nation’s five largest mortgage servicers: Bank of America Corporation, JPMorgan Chase & Company, Wells Fargo & Company, Citigroup Inc. and Ally Financial Inc. (formerly GMAC).
The agreement is suppose to hold mortgage servicers accountable for abusive practices and requires them to commit more than $20 billion towards financial relief for consumers.
The deal also ends a separate investigation into Bank of America and Countrywide for inflating appraisals of loans from 2003 through most of 2009. Bank of America will pay $1 billion to settle that federal probe.
The agreement will force the five largest mortgage lenders to reduce loans for approximately 1 million households. The reduced loans would benefit homeowners who are behind on their payments and owe more than their homes are worth.
Additionally, another 750,000 Americans may be eligible for assistance and would likely receive checks amounting to approximately $1,800 each.
Those who lost their homes to foreclosure are unlikely to get their homes back or benefit much financially from the settlement.
– $17 billion will go toward reducing the principal that struggling homeowners owe on their mortgages
– $5 billion will be placed in a reserve account for various state and federal programs with a portion covering the $1,800 checks sent to homeowners affected by the deceptive practices.
– About $3 billion will help homeowners refinance at 5.25%
Critics say the proposed deal doesn’t go far enough. They argued for a thorough investigation of potentially illegal foreclosure practices before a settlement is hammered out.
For loan modifications and refinance options, borrowers may be contacted directly by one of the five participating mortgage servicers. Loans owned by Fannie Mae or Freddie Mac are not impacted by this settlement.
Banks will be restricted from foreclosing while the homeowner is being considered for a loan modification. The agreement does not prevent state and federal authorities from pursuing criminal enforcement actions related to this or other conduct by the servicers..
The process will take time but an initial timeline has been set up. That timeline is:
– Over the next 30 to 60 days, settlement negotiators will be selecting an administrator to handle the logistics of the settlement and monitor compliance.
– Over the next 6 to 9 months, the settlement administrator, attorneys general and mortgage servicers will work to identify homeowners eligible for the immediate cash payments, principal reductions and refinancing. Those eligible will receive letters.
– The settlement will be executed over the next 3 years.
It is always recommended homeowners obtain a competent Foreclosure Defense attorney to ensure you receive the fullest benefit of this agreement and to protect your rights. Most attorneys are willing to work within your budget to provide you with an affordable payment plan to pay for their services.
Keith A. Gantenbein, Jr. is a Colorado foreclosure defense attorney located in Denver and servicing all of Colorado. He also handles bankruptcies, mortgage negotiations, lender liability, real estate, civil litigation, contracts and landlord/tenant. If you think you will be facing foreclosure, or are in the foreclosure process, or have had a wrongful foreclosure, contact Keith Gantenbein at (303) 618-2122 for a one-hour consultation where he will discuss your situation and go over all your options with you.
This article is not intended as legal advice. The opinions of this article are solely the opinion of the author.