WHAT YOU NEED TO KNOW ABOUT THE NATIONAL MORTGAGE SETTLEMENT

On Monday, March 12th, the proposed Settlement documents were filed in Federal Court revealing what each of the Lenders is required to do. You can read the details at http://nationalmortgagesettlement.com/. How they’ll meet those obligations is critical to upside down homeowners. Those details are slowly emerging through analysis, press-releases, and side deals.  Here’s what you need to know so far:

1.  The Lenders - the Settlement ends lawsuits by the Federal Government and State Attorney Generals against: Bank of America, Wells Fargo, JP Morgan Chase, Citigroup, and GMAC/Ally.

2.  The Settlement - requires the 5 Lenders to collectively provide up to $25 Billion in relief to distressed borrowers and payments to government agencies.  This will be provided through a combination of direct cash payments and credits for debt reduction and other loan adjustments.  The individual lender shares are:   BofA: $11.82 Billion; Wells Fargo: $5.35 Billion; Chase: $5.29 Billion; Citigroup: $2.21 Billion; and Ally:  $610 Million.

3.  The Allocations - The Settlement requires the Lenders to provide the relief through three broad categories:

             (1) Foreclosure Assistance Payments - paid to State and Federal Govenerment agencies;

             (2) Consumer Relief Programs - credits for principal reduction of 1st and 2nd loans;

             (3) Loan Refinancing - provides interest rate and principal reduction

4.  The Side Deals - The Settlement is very complex and the devil will be in the details since each lender can map out exactly how it plans to satisfy its allocations.  See my recent Blog on the Wells Fargo roadmap.  However, already participating lenders are cutting “side-deals” to obtain a better result by offering even better settlement options:

          a.  Bank of America - announced deeper principal reductions for about 200,000 homeowners, up to $100,000 each.  In exchange, they will avoid up to $850 Million in penalties.  BofA has also announced that it is temporarily halting foreclosures while it identifies and solicits the potential beneficiaries of these reductions.

          b.  Ally - announced possible principal reductions to current market value.  Further, some borrowers in extreme financial distress may get reductions to 85% of their home’s value.

5.  What to Do Now - Although the Settlement terms must still be approved by a Federal Judge, if you are in financial distress and in danger of losing your home, contact your State Attorney General’s office for information and contact links with the specific lenders.  The California AG’s website for the National Settlement is at http://oag.ca.gov/nationalmortgagesettlement and has internet and/or phone contacts for each of the participating lenders.  Don’t expect immediate relief.  The Settlement is a process that still requires Court approval, will take several months to get organized, and will take up to three years to fully provide benefits.  But, it does promise substantial relief for those who qualify and diligently pursue the available benefits.

The information presented in this Article is not to be taken as legal advice. Every person’s situation is different. If you are upside-down on your loan, especially if you’re facing a lender lawsuit, get competent legal advice in your State immediately so that you can determine your best options.

Article was written by Steve Beede.