In March 2012, 49 states, various state mortgage regulatory agencies, the federal government, and 5 of the largest mortgage servicers entered into the National Mortgage Settlement. The 5 mortgage servicers are:
- Bank of America
- JPMorgan Chase
- Wells Fargo
These 5 multi-billion dollar service companies admitted in this agreement that they illegally initiated foreclosure procedures against ill-prepared borrowers. These servicers also admitted that in many of those foreclosure proceedings, they did not possess the requisite paperwork to legally foreclose upon the properties. The government agencies released the servicers from certain governmental claims in exchange for approximately $25 billion in relief to distressed borrowers and direct payments to states and the federal government. Relief from the settlement can go to both borrowers whose loans are serviced by any of the 5 named servicers as well as to borrowers whose loans are owned by one of the 5 named servicers.
What did the 5 Servicers Agree to do in the Settlement?
- Make direct payments to governments of approximately $5 billion dollars
- Provide relief to borrowers including
- Principal Forgiveness
- Loan Modifications
- Short Sales
- Unemployment Payment Forbearance for Borrowers who are in Between Jobs
- Payments of Up to $2,000 to Certain Borrowers who Lost their Homes to Foreclosure between January 1, 2008 and December 31, 2011
- Adopting 300 New Servicing Standards when dealing with borrowers which includes such changes as
- Maintaining adequate trained staff to deal with loss mitigation issues
- Thoroughly evaluating borrowers for all loss mitigation options before referring loans to foreclosure
- Restricting servicers from foreclosing while the borrower’s loan modification application is pending which is referred to as dual-tracking
- Expediting and facilitating short sales of distressed properties
- Restricting default fees, late fees, third-party fees, and forced placed insurance
- Implementing strict timelines when dealing with loss mitigation issues
- Automatic reviewing of loss mitigation denials with a right to appeal
- All court documents including affidavits and sworn statements filed in foreclosures and bankruptcy cases must be accurate and complete and supported by competent and reliable evidence
Which Borrowers are Eligible for Assistance under the National Mortgage Settlement Program?
- Homeowners in default or at imminent risk at time of Settlement
- Homeowners whose homes are underwater in addition to other requirements
- Certain homeowners who lost their homes to foreclosure from January 1, 2008 through December 31, 2011
- Homeowners whose loans are being serviced or owned by one of the 5 listed servicers
Are Borrowers Eligible for Assistance under the National Mortgage Settlement Agreement if they do not reside in the home?
Yes, which is significantly different from past property relief programs, where to be eligible for assistance, borrowers had to live in the home. Under the National Mortgage Settlement, the home has to be occupied, however, the home does not have to be occupied by the owner of the home.
Which Borrowers are Not Eligible for Assistance under the National Mortgage Settlement Program?
- Loans that are owned by Fannie/Freddie or FHA/VA
If the Homeowner’s loan is current, can he receive any assistance under the National Mortgage Settlement?
Yes, this homeowner could be eligible for refinancing, if he meets basic eligibility criteria, including owing more on his home than it is worth and having a current interest rate of more than 5.25%.
Is there any help for Borrowers who have already lost their homes to Foreclosure?
Yes, in late September through early October 2012, the National Mortgage Settlement Administrator will mail Notice Letters and Claim Forms to approximately 2 million borrowers who lost their home to foreclosure between January 1, 2008 and December 31, 2011, and whose loans were serviced by one of the 5 mortgage servicers. The borrowers could be eligible for up to $2000.00. If you believe that you are eligible for this assistance and do not receive a Notice Letter and Claim Form, please contact the National Mortgage Settlement Administrator at 1-866-430-8358.
What should you do if you believe that you are eligible for Assistance under the National Mortgage Settlement?
If your lender or servicer is one of the 5 listed servicers, you should contact them immediately and ask to speak to someone regarding your eligibility for the National Mortgage Settlement? You should open all documentation from your servicer. Once the process has started, make sure you ask who will be your specific contact person along with their contact information. Ensure that if you have any questions regarding the status of your application, contact that specific person. If that person changes, make sure you get the name and contact person for the new point of contact. Look at information about the National Mortgage Settlement at the official website www.nationalmortgagesettlement.com.
The sooner you get started the better. The servicers have a financial incentive to complete loan modifications within the first 12 months of the National Settlement Agreement date of March 1, 2012. Cash Payment Checks for foreclosed homes to eligible borrowers are expected to be sent out early 2013. Completed loan modification applications must be reviewed, and a decision made within 30 days of receipt. The servicers must have all 304 Servicing Standards completed by October 2, 2012. Relief from the National Mortgage Settlement must be completed by all 5 servicers by April 2016. Any servicer that fails to meet its agreed upon obligation under the National Settlement Agreement will be required to provide additional cash payments.