Summary of the National Mortgage Settlement Act for Boise Idaho Homeowners
After nearly one year of discussions, the National Mortgage Settlement Act was finalized. This settlement represents an agreement between state attorneys general and five mortgage servicers including Wells Fargo, CitiBank, Bank of America, Chase and Ally who opted in towards the end. At $25 billion, this settlement represents the second largest financial recovery in our countries history. The settlement has been a long time coming and was born out of the dire condition of the national real estate market as well as accusations that the mortgage industry acted improperly after being caught “robo signing” legal documents. Robo-signing is the illegal practice of hiring individuals to sign thousands of foreclosure documents without reviewing the validity or accuracy of the actual documents as required by law. Other alleged industry offenses such as deceptive lending practices involving loan modification issues was also addressed in the Act.
This legislation will provide an avenue for hundreds of thousands of distressed homeowners to stay in their homes through targeted programs that have been authorized by congress. It also enables borrowers of alleged unfair foreclosures to gain access to support services such as housing counseling and foreclosure prevention programs.
How will the money be used to help homeowners?
$17 billion of the $25 billion settlement has been allocated to financially distressed borrowers who have the desire and means to stay in their homes, but are otherwise struggling to do so. This group will be required to make reasonable monthly payments while seeking assistance. Over half of the $17 billion allocated to this segment of distressed homeowners must be allocated to principle reduction for borrowers who are delinquent on their home loan payments or at risk of becoming delinquent. The balance will be relegated to other forms of assistance such as short sale facilitation, payment forbearance for those that are unemployed, relocation assistance and waiving deficiency balances for borrowers who were unable to stay in their homes.
Is there refinancing assistance for homeowners with negative equity?
The National Mortgage Settlement Act does not limit provisions to just those homeowners who are currently distressed. Acknowledging that many homeowners are underwater on their home loans, the Act serves to provide assistance via refinancing options. Generally speaking, homeowners with negative equity have been barred from refinancing their home loans to more favorable interest rates. The Act allocates $3 billion to provide access to refinancing to eligible homeowners. To be eligible a homeowners must be current on their payments, have a loan to value ratio in excess of 100% and a current interest rate in excess of 5.25%. In addition, the refinanced payment must reduce the homeowner’s monthly house payment by at least $100.
Will victims of improper foreclosure processes be compensated?
A portion of the settlement funds ($1.5 billion) will be set aside in a fund to compensate homeowners who were foreclosed on after January 1, 2008. Qualified borrowers will be notified of their rights to pursue a claim against the fund. Homeowners who were victims of improper foreclosure practices or who were not offered adequate foreclosure remediation alternatives may be eligible for a uniform payment of $2,000, depending on the response level to the program. Any payment received will not release the bank from further legal action by precluding borrowers from seeking further legal action.