Foreclosure Settlement with the Banks

One Huge Settlement

The Players

The attorneys general of 49 states recently settled for $26,000,000,000 (yes, twenty-six billion dollars) with Ally/GMC, Bank of America, Citi, JP Morgan Chase and Wells Fargo. These five banks alone account for 60% of the loans serviced in America. The only state that did not participate was Oklahoma. That means that homeowners in all states except Oklahoma can particpate in the programs agreed to in the settlement.

Relief, Sweet Relief

Homeowners can get relief in one of three ways:

• Loan Modifications. This includes principal reduction for first and second mortgages. The banks must provide up to $17 billion in principal reduction and other loan modifications.
• Homeowners who are current but upside-down in equity. These homeowners can refinance at current rates. The banks must provide up to $3 billion for this.
• Borrowers who lost homes to foreclosure. At an estimated $2,000 per household, up to $1.5 billion will go to 750,000 homeowners who lost homes due to foreclosure. And the homeowners will not be required to release any claims currently against the banks. They can continue action against the lenders.

Who Is Eligible

Only loans that are currently being serviced or owned by one of the five banks above are eligible. Loans owned by Fannie Mae or Freddie Mac are not eligible.

Banks will be contacting the homeowners directly. Beware of scams!

The Timeline

It should take 30 to 60 days to select administrators who will oversee the settlement, handle the logistics and monitor compliance. Then it should take another six to nine months to identify the homeowners. It should take three years to finish up.

The original articles can be found here and here.