Recently, the five largest mortgage banking companies—Bank of America, GMAC, Citi, Wells Fargo, and JPMorgan Chase—settled a lawsuit brought by all 50 United States Attorneys General. The total settlement is approximately $25 billion—the second largest settlement recovery ever by state attorneys general. The settlement resolved claims related to evidence that these banks illegally signed foreclosure documents and improperly handled foreclosures and loan modifications. Nevada is expected to receive about $1.5 billion of the total funds. Some of the more notable terms of the settlement are as follows:
The settlement allocates $17 billion to borrowers who cannot afford to pay their mortgages. Sixty percent of the $17 billion will be applied toward principal reductions, allowing borrowers to refinance their mortgages more easily. The settlement also requires the banks to spend about $5.2 billion on foreclosure alternatives and loss mitigation options.
For homeowners who are current on their payments but owe more than their home is worth, the settlement allocates $3 billion in funds to refinancing programs. To qualify for refinancing, borrowers must be current on their payments, have an interest rate in excess of 5.25%, and own a home that’s worth less than the unpaid mortgage balance.
$1.5 billion of the settlement funds will be allocated to borrowers who lost their homes to foreclosure after January 1, 2008. Eligible borrowers are those who were not offered loss mitigation options or whose foreclosure documents were improper. Qualifying borrowers will receive fixed compensation of approximately $2,000.
The settlement is recent, so it will take time for banks to implement its mandates. Prudent borrowers should verify for themselves whether they qualify for any of the new programs. A skilled attorney can assist by analyzing each borrower’s situation independently. Rod Woodbury can be reached at 933-0777 or by e-mail at email@example.com.