Nearly 2 million homeowners hurt by abusive foreclosure practices could get substantial relief under a landmark $25 billion legal settlement reached between government officials and five of the nation’s biggest banks.
See also: Mortgage refinance calculator.
At least $17 billion would go toward lowering mortgage balances and interest rates for people who “cannot afford their current payment but could make reasonable payments if the loan amount were reduced,” according to the National Association of Attorneys General (NAAG), which initiated the suit.
The settlement affects customers of five major banks — Bank of America, Citi, Wells Fargo, JPMorgan Chase and Ally. Relief could be available to:
- Borrowers who are current on their mortgage payments but “under water” — their homes are worth less than they owe.
- Some 750,000 homeowners who lost their homes to foreclosure between Jan. 1, 2008, and Dec. 31, 2011, who will qualify for payments of about $2,000.
- Homeowners who need loan modifications, including principal reduction.
Within nine months, the settlement administrator, attorneys general and the mortgage servicers will work to identify homeowners eligible for the immediate cash payments, principal reductions and refinancing. Those eligible for restitution will receive letters.
Further information is available at http://www.nationalmortgagesettlement.com/help. You can also contact your state attorney general’s office. To find yours, go to www.naag.org and click on “The Attorneys General.”
Homeowners in Oklahoma, the only state not to join in the settlement, will not qualify for the assistance.
Negotiations between government officials and lenders began in 2010 after the “robo-signing” scandal came to light. Banks had been failing to verify documents and used fake signatures in order to rush homeowners to foreclosure.
“Our settlement holds America’s largest banks accountable for harms homeowners suffered from shoddy loan servicing, illegal robo-signing and faulty foreclosure processing,” said Washington state Attorney General Rob McKenna.