In what is touted as the largest multistate settlement since the Tobacco Settlement in 1998, the mortgage settlement will provide up to $25 billion in relief. The settlement is intended to aid in ending the housing crisis, which has left many homeowners struggling to stop foreclosures.
Details of Recent Government Settlement on Mortgage Fraud
Ally/GMAC, Bank of America, Citi, JPMorgan Chase and Wells Fargo agreed to the settlement terms after months of negotiation. State and federal investigations found these lenders were routinely signing foreclosure documents without checking for accuracy, an illegal process known as “robo-signing.” The lenders were also accused of failing to negotiate in good faith with borrowers over inflated fees, according to Forbes.
The settlement encourages lenders to provide assistance to current struggling borrowers and incorporates requirements that are intended to slow down the pace of foreclosures.
How the Settlement Will Affect Mortgagees
The settlement will affect homeowners in two basic ways: principal reduction and refinancing options. The principal reduction will apply to borrowers who are behind in payments and underwater, owing more on their homes than the home is worth. At least $10 billion from the settlement is set aside for reducing the principal owed by these borrowers.
Another portion of the settlement is designated to borrowers that are in a similar situation, but are current on mortgage payments. This group is eligible for refinancing at lower interest rates, which will reduce their monthly mortgage payments.
The overall desire to slow the rate of foreclosures is intended to benefit homeowners. Officials predict the housing market will rebound and underwater home owners can recoup losses. It will take time before the actual affect to specific mortgagees is known. The court will next assign an administrator to oversee the settlement, and eligible home owners will be identified and notified by mail over the next six to nine months.
If you or a loved one is currently struggling to make mortgage payments, it is important to seek the counsel of an experienced lawyer to discuss your legal rights.