Tuesday, February 21, 2012
As some of you may or may not be aware, there was a recent settlement between 5 of the large banks and the State Attorney Generals regarding the Foreclosure practices and on-going servicing of their loans.
Below, I will provide a detailed overview of the settlement and provide my take on what it means for Washington Homeowners.
The $25 Billion settlement will provide financial ‘relief’ to an estimated one million at-risk borrowers.
The pact, as agreed upon by Bank of America, Wells Fargo, Chase, Citi and Ally Bank will offer reduction in loan principal and other assistance to qualified homeowners. $17 Billion will go to at-risk homeowners.
Weitz - Let me translate: these 5 banks only hold 20% of mortgages (note the difference between owning the loan and servicing the loan – they service a much higher percent, but only own 20%).
The pact allows for potential re-financing for people current on payments even if they are underwater on their homes.
Weitz - there were no specific details given who gets re-financing and under what terms.
Additionally, the deal will potentially provide $1500 to $2000 to people who have previously been foreclosed upon.
Washington Specific Information:
Washington stands to get $648 million under the $25 billion national settlement with five of the nation's biggest mortgage servicers announced Thursday.
The biggest chunk, $525 million, is aimed at helping those who are financially underwater on their mortgage because their home's value plunged: $455 million will go for reducing the loan principal of homeowners who are delinquent on payments, and $70 million for refinancing the loans of homeowners still current and paying higher-than-market interest rates on their mortgage.
Other moneys Washington state will receive under the settlement include:
• $45 million for foreclosure relief programs, including housing counselors, free legal assistance and mediation.
• $5 million to the state Attorney General's office to recoup its costs.
• $5 million in civil penalties, which will go to the state's treasury
How long will it take to get help?
Over the next 30-60 days (From Feb. 10, 2012), settlement negotiators will pick an administrator to handle the logistics of the deal. Over the next 6-9 months, the parties will work to identify which borrowers will get help.
It is expected that servicers will reach out to borrowers in the coming weeks, but they techinically have 3 years to provide help.
Each bank will have their own toll-free number and website and a national clearing house will be established at nationalmortgagesettlement.com.
• Ally/GMAC: 800-766-4622
• Bank of America: 877-488-7814
• Citi: 866-272-4749
• JPMorgan Chase: 866-372-6901
• Wells Fargo: 800-288-3212
What are the rules of the principal reduction program?
1) Borrowers must be a. behind on payments or b. at imminent risk of default
2) This does not cover loans owned by Fannie and Freddie Mac – this is important has a majority of loans are in-deed owned by Fannie and Freddie.
3) It will apply to both 1st and 2nd mortgages (if they are owned by the banks).
** Expect this to apply mostly to the 2nd loans that should reduced anyways.
What about the Re-Finance Program?
The re-finance program will apply to loans owned by the banks (rare).
Further, borrowers must be current on their loan payments and owe more than their home is worth. The interest rate can be reduced to as low as 5.25%
Weitz - Ha!!. Note the 5.25% - that’s only about 1.5% higher than current market rates – thank you, Banksters! ….Way to solve the problem with way above market interest rates.
Post –Foreclosure Help:
Apparently notices will be mailed to eligible borrowers. (Weitz – not sure how they are going to get those mailing addresses of people post-foreclosure).
What’s my take?
Let me translate what the banks have negotiated:
Don’t call us. We’ll call you. We’ll send you a letter if we think that you are eligible for help and we’ll decide (arbitrarily) in ‘awhile’ who is eligible for help.
My opinion: The devil is in the details. I see no real way in which to hold banks accountable to the pact. In fact, I think they benefitted tremendously as the threat of future legal recourse has now been alleviated.
Now that the banks no longer have to worry about ‘robo-signing’ lawsuits and other procedurally driven complaints / lawsuits, I expect the number of foreclosures to begin to rise again at least modestly, if not substantially.
For more information on your benefits and pitfalls of foreclosure and/or short sale, please consider contacting a Seattle Foreclosure Attorney or a Seattle Short Sale Attorney.
Weitz Law Firm, PLLC
520 Kirkland Way, Ste 103
Kirkland, WA 98033
at 10:34 AM