Are you Eligible for Relief under the National Mortgage Settlement?

September 3, 2012

OVERVIEW

The National Mortgage Settlement will offer various forms of relief for distressed families who qualify. As provided by the Center for Responsible Lending, the below is a preliminary guide that offers information for those who may be eligible for relief.

The Settlement administrators (designated by participating states*), state attorneys general and the mortgage servicers** involved in the lawsuit will identify homeowners eligible for benefits. These benefits may include immediate cash payments, loan modifications with mortgage balance reductions, or refinancing. If you are eligible, you should receive a letter from the administrator in your state. All actions resulting from the settlement are scheduled to take place over the next three and a half years.

Please note that benefits are not guaranteed even if you meet eligibility requirements; every case will be considered individually. However, you may be eligible for help under the national mortgage settlement if any one of these situations applies to you:

  1. You lost your home to foreclosure between 2008 and 2011; OR
  2. You are current on your mortgage payments, but underwater (you owe more on your mortgage than the current value of the house); OR
  3. You are behind on your mortgage or at immediate risk of falling behind.

For the most up-to-date information, click here.

*All states are participating except Oklahoma.
**Mortgage servicers are the companies or banks that receive and process mortgage payments and handle other administrative tasks related to home loans.

AM I ELIGIBLE FOR HELP?

Scenario 1: You have already lost your home to foreclosure.

Potential Benefits

Cash payment of approximately $1,800-$2,000 If you still owe any money on the mortgage because of an outstanding balance after a foreclosure sale, you may have an opportunity to have some or all of that debt forgiven.

Preliminary Checklist for Eligibility

  • When you owned the home, you occupied the house as the owner, and the property had no more than four separate units.
  • Your foreclosure sale was completed between Jan. 1, 2008 and Dec. 31, 2011.
  • Your mortgage was serviced or owned by Bank of America, JPMorgan Chase, Citibank, Wells Fargo or Ally Financial (formerly GMAC).

Process

  • If you are eligible for benefits, you should receive a claim form in the mail from the settlement administrator.
  • If you are concerned you will be difficult to locate, you should contact your Attorney General’s Office, and they will forward your information to the appropriate person to ensure you are contacted if you are eligible.

Scenario 2: You are current on your loan, but underwater.

Potential Benefits

Eligible underwater borrowers may have an opportunity to refinance loans at lower interest rates.

Preliminary Checklist for Eligibility

  • You own and occupy your property, and your property has no more than four separate units.
  • Your mortgage is serviced and owned by one of these banks: Bank of America, JPMorgan Chase, Citibank, Wells Fargo, and Ally Financial (formerly GMAC). Note that Fannie Mae and Freddie Mac-owned loans may be eligible for refinance under a separate program called HARP. To see if your loan is owned by Fannie Mae or Freddie Mac, go here.
  • Your mortgage is underwater—i.e., you owe more on the loan than the current value of the house.
  • You have not made any late mortgage payments within the last 12 months.
  • You have not been through a bankruptcy or foreclosure in the last 24 months.
  • Your current interest rate is at least 5.25%
  • The refinance would reduce your interest rate by ¼ of a percentage point or your monthly payment by at least $100.
  • Your mortgage is not a manufactured home loan, and it is not insured by the Federal Housing Administration (FHA) or the Veterans’ Administration (VA).
  • There are no restrictions on when your mortgage was made – could be any date.

Process

  • The participating banks (BoA, JPMorgan Chase, Citibank, Wells Fargo, and Ally Financial) are required to notify eligible borrowers of the availability of the refinance program, but borrowers may also contact the banks directly for information.
  • The application process has yet to be determined.

Scenario 3: You’re late on your mortgage or at imminent risk of missing payments.

Potential Benefits

  • Loan modification. You may have opportunity to receive a loan modification with a principal write-down (i.e., a reduction in the amount you owe) that would reduce your monthly payments.
  • Forbearance. If you are unemployed, you may have an opportunity to get mortgage payment forbearance (the lender will delay foreclosure and offer a plan for allowing you to catch up on payments).
  • Short sale. You may have the opportunity to have the bank facilitate a short sale (i.e., you would sell your property for less than the amount of the mortgage to avoid a foreclosure).
  • Deed in lieu. You may have an opportunity to proceed with a “deed in lieu of foreclosure” (i.e., you give the lender all legal rights to the property in exchange for its agreement not to pursue foreclosure formally).
  • Relocation assistance. You may be able to get funds to help pay relocation expenses following a foreclosure.
  • Relief from further financial obligations after home sale. You may have an opportunity to receive relief from paying some or all of the amounts that might still be legally owed on the mortgage loan following a foreclosure sale or short sale.

Preliminary Checklist for Eligibility

  • You own and occupy your property, and your property has no more than four separate units.
  • Your mortgage is serviced or owned by Bank of America, JPMorgan Chase, Citibank, Wells Fargo or Ally Financial (formerly GMAC).
  • Mortgages owned by Fannie Mae or Freddie Mac are not eligible. To see if your loan is owned by Fannie or Freddie, go here.
  • There are no restrictions on when your mortgage was made – could be any date.

Process

  • You may be contacted directly by one of the five participating mortgage servicers, but you should also contact your servicer to request consideration for the range of options that might be available to you.
  • You may want to consult a HUD-certified housing counselor for assistance.
  • Some details of the process are yet to be determined.

WHAT ABOUT THE INDEPENDENT FORECLOSURE REVIEW?

The Office of the Comptroller of the Currency and the Federal Reserve Board are overseeing an Independent Foreclosure Review. This is a separate effort from the National Mortgage Settlement. This initiative could result in cash payouts to borrowers who suffered financial harm due to improper foreclosures.

Potential Benefits

You may be eligible to receive cash remedies if the Review shows (1) your loan was serviced by one of the banks or companies listed below, and if (2) if you suffered financial harm due to errors, misrepresentations or other deficiencies in the foreclosure process. If you are a candidate for this benefit, you must apply and submit paperwork to participate in the Review. Deadline for submitting a request for review is December 31, 2012.

Basic Eligibility

  1. You were in any stage of the foreclosure process on a home that was your primary residence from January 1, 2009 to December 31, 2010.
  2. Your mortgage servicer (the company that received your mortgage payments) was one of these businesses:
  • America’s Servicing Company
  • Countrywide
  • National City
  • Aurora Loan Services
  • EMC
  • PNC
  • BAC Home Loans Servicing
  • Everbank/Everhome
  • Sovereign Bank
  • Bank of America
  • Financial Freedom
  • SunTrust Mortgage
  • Beneficial
  • GMAC Mortgage
  • U.S. Bank
  • Chase
  • HFC
  • Wachovia
  • Citibank
  • HSBC
  • Washington Mutual
  • CitiFinancial
  • IndyMac Mortgage Services
  • Wells Fargo
  • CitiMortgage
  • Metlife Bank
  • Wilshire Credit

Find Out More about the Independent Foreclosure Review

Answers to questions about the process and borrower eligibility are available at (888) 952-9105, Monday through Friday from 8 a.m. to 10 p.m. (ET), and Saturday from 8 a.m. to 5 p.m. (ET). You can also get more information about the review at the website.

Click here to see Frequently Asked Questions and Answers.

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How the Money Will be Distributed in the National Mortgage Settlement

September 2, 2012

In February 2012, 49 state attorneys general (except Oklahoma) and the Federal Government announced the largest consumer financial protection settlement in U.S. history with the country’s five largest loan servicers, known as the National Mortgage Settlement:

The five servicers will provide at least $25 billion in consumer relief to distressed borrowers and directs payments to states and the Federal Government.

The agreement settles state and Federal investigations finding that the country’s five largest loan servicers routinely signed foreclosure related documents outside the presence of a notary public and without really knowing whether the facts they contained were correct.  Both of these practices violate the law.  The settlement provides benefits to borrowers whose loans are owned by the settling banks as well as to many of the borrowers whose loans they service.*

*Borrowers from Oklahoma will not be eligible for any of the relief directly to homeowners because Oklahoma elected not to join the settlement.

As stated in the Settlement Fact Sheet, the money in the settlement will be distributed in several ways:

FINANCIAL RELIEF FOR HOMEOWNERS:

The servicers will be required to dedicate $20 billion to various forms of relief to borrowers.

  • Principal reduction. At least $10 billion will be dedicated to reducing principal for borrowers who, as of the date of the settlement, owe more on their mortgages than their homes are worth and are either delinquent or at imminent risk of default.
  • Refinancing. At least $3 billion will be dedicated to a refinancing program for borrowers who are current on their mortgages but who owe more on their mortgages than their homes are worth. All borrowers who meet basic eligibility criteria will be eligible for the refinancing, which will reduce interest rates for borrowers who are currently paying much higher rates or whose adjustable rate mortgages are due to soon rise to much higher rates.
  • Other forms of relief. Servicers will be required to dedicate up to $7 billion to other forms of relief, including forbearance of principal for unemployed borrowers, anti-blight programs, short sales and transitional assistance, benefits for service members who are forced to sell their homes at a loss as a result of a Permanent Change in Station, and other programs.

To encourage servicers to provide relief quickly, there are incentives for relief provided within the first 12 months – and additional cash payments required for any servicer that fails to meet its obligation within three years. Servicers will receive only partial credit for every dollar spent on some of the required activities, so the settlement will provide direct benefits to borrowers in excess of $20 billion.

PAYMENTS TO STATE AND FEDERAL GOVERNMENTS:

In addition to the $20 billion of financial relief for homeowners, the servicers will make $5 billion in cash payments to the states and the Federal Government. Of the $5 billion:

  • Payments to Foreclosed Borrowers. Through the settlement, a $1.5 billion Borrower Payment Fund will be established to provide cash payments to borrowers whose homes were sold or taken in foreclosure between and including Jan. 1, 2008 and Dec. 31, 2011, and who meet other criteria. This program is distinct from, but complimentary to, the restitution program currently being administered by Federal banking regulators to compensate those who suffered direct financial harm as a result of wrongful servicer conduct.
  • State and Federal payments. The remaining funds of $3.5 billion will go to state and Federal Governments to be used to repay public funds lost as a result of servicer misconduct, fund housing counselors, legal aid, and other similar purposes determined by state attorneys general. The funds coming to the Federal Government will primarily be allocated to the FHA Capital Reserve Account, with portions also going to the Veterans Housing Benefit Program Fund and to the Rural Housing Service.

FINANCIAL OBLIGATIONS OF INDIVIDUAL SERVICERS:


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