By Jarom Bergenson
If you’re reading this Newsletter, you’re probably already aware that earlier this month, 49 of the 50 states and the federal government reached a $25 Billion settlement with the nation’s five largest mortgage loan servicers: Ally/GMAC, Bank of America, Citi, JPMorgan Chase, and Wells Fargo. However, very few of us actually understand the details beyond the headlines.
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.
Key Provisions of the Settlement
1) Immediate aid to homeowners needing loan modifications now, including first and second lien principal reduction. The servicers are required to work off up to $17 billion in principal reduction and other forms of loan modification relief nationwide. State attorneys general anticipate the settlement’s requirement for principal reduction will show other lenders that principal reduction is one effective tool in combating foreclosure and that it will not lead to widespread defaults by borrowers who really can afford to pay.
2) Immediate aid to borrowers who are current, but whose mortgages currently exceed their home’s value. Borrowers will be able to refinance at today’s historically low interest rates. Servicers will have to provide up to $3 billion in refinancing relief nationwide.
3) Immediate payments to borrowers who lost their homes to foreclosure with no requirement to prove financial harm and without having to release private claims against the servicers or the right to participate in the Office of the Comptroller of the Currency (“OCC”) review process. $1.5 billion will be distributed nationwide to some 750,000 borrowers.
4) First ever nationwide reforms to servicing standards. These servicing standards require single point of contact, adequate staffing levels and training, better communication with borrowers, and appropriate standards for executing documents in foreclosure cases, ending improper fees, and ending dual-track foreclosures for many loans.
5) State AG oversight of national banks for the first time.
* National banks will be required to regularly report compliance with the settlement to an independent, outside monitor that reports to state Attorneys General.
* Servicers will have to pay heavy penalties for non-compliance with the settlement, including missed deadlines. While the settlement is broad-based and fairly far-reaching, borrowers need to be aware that it does not settle all potential claims against these banks. Specifically, this settlement does not:
* Release any criminal liability or grant any criminal immunity.
* Release any private claims by individuals or any class action claims.
* Release claims related to the securitization of mortgage backed securities that were at the heart of the financial crisis.
* Release claims against Mortgage Electronic Registration Systems or MERSCORP.
* Release any claims by a state that chooses not to sign the settlement.
* End state attorneys general investigations of Wall Street related to financial fraud or the financial crisis.
What Now?
The question then becomes: How do I know if I qualify for a piece of the settlement, and how do I make sure my rights are protected?
Because of the complexity of the mortgage market and this agreement, which will be performed over a three-year period, borrowers will not immediately know if they are eligible for relief.
* Over the next 30 to 60 days, settlement negotiators will be selecting an administrator to handle the logistics of the settlement and monitor compliance.
* Over the next six to 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 will receive letters.
* This settlement will be executed over the next three years.
Where Should I Go for Help?
For loan modifications and refinance options, borrowers may be contacted directly by one of the five participating mortgage servicers. Keeping in mind the timeline above, you may contact the banks directly if you need additional information:
* Ally/GMAC: 800-766-4622
* Bank of America: 877-488-7814 (Available M-F 7am – 9pm CT and Saturdays 8am CT – 5pm CT
* Citi: 866-272-4749
* JPMorgan Chase: 866-372-6901
* Wells Fargo: 800-288-3212 (Available M-F 7 a.m. to 7 p.m. CST)
Many of our clients will have loans that are owned by Fannie Mae or Freddie Mac. Please keep in mind that Fannie and Freddie loans are not impacted by this settlement. You may visit the following websites to learn if your loan is owned by either Fannie Mae or Freddie Mac:
* http://www.fanniemae.com/loanlookup
* http://www.freddiemac.com/mymortgage
These sites will also include links to information about mortgage and foreclosure programs you may be eligible to access. You may also call 1-888-995-HOPE (4673)
For borrowers who lost their home to foreclosure between Jan. 1, 2008 and Dec. 31, 2011, a settlement administrator designated by the attorneys general will send claim forms to persons eligible for cash restitution.
If you believe you are eligible for relief under this settlement but are concerned you will be difficult to locate, or if you are not contacted in the next six to nine months, please contact your Attorney General’s Office, or our office at 435-586-9366. We can review your situation to help determine whether you should be eligible for settlement benefits. We can also get you in touch with the right people to make sure you get what your portion of this historic settlement
