Mortgage settlement may help Pinoys
|Posted by Manila Mail under Articles/Stories|
WASHINGTON D.C. – The federal government, 49 states and five of the largest US banks reached a settlement to the tune of $25 Billion which could benefit certain homeowners, including Filipino Americans, who are in default on their mortgages, those who are current on their mortgage but unable to refinance because of shrinking home value and those who have lost their homes in foreclosure.
This deal covers mortgages owned or serviced by Ally Financial, Inc./GMAC Mortgage, Bank of America Corp., Citigroup, Inc., J.P. Morgan Chase & Co., and Wells Fargo & Co. Loans owned by Fannie Mae and Freddie Mac are not covered.
In 2010, attorneys general from several states filed suit against the banks for alleged irregularities in the foreclosure process in that foreclosure documents were not actually signed before a notary public and not reviewed by responsible bank officers. The practice was referred to as “robo-signing.”
At least $10 billion will be applied toward reduction of the principal for those whose mortgage balances are higher than the present value of their homes, also referred to as underwater mortgages. To qualify for a mortgage reduction, the borrower must be behind on their mortgage payments or in imminent risk of default. About 1 million out of 11 million underwater homeowners could see their principal reduced by an average of $20,000.00.
Approximately 750,000 homeowners whose homes are worth less than the mortgage balance will be eligible to refinance provided that they are current on their installment payments. The interest rate could be reduced to as low as 5.25%. $3 billion will be applied for the refinancing program.
Certain borrowers who lost their homes in foreclosure between 2008 and 2011 will be compensated from $1,500.00 to $2,000.00 depending on how many people will file claims. Qualified claimants do not have to prove any irregularity in the foreclosure process. $1.5 billion is allotted towards foreclosure compensation.
Within the next 30 to 60 days, the parties to the settlement will pick and administrator who will be charged with overseeing the implementation of the deal. In the next six to nine months, the administrator, state attorneys general and mortgage servicers will identify eligible borrowers who will be notified in writing. Mortgage companies are given three years to extend the required help.
The settlement encourages lenders to make foreclosure a last resort. It prohibits foreclosure of mortgages that are being considered for loan modification. It requires mortgage companies to adhere to strict pre-foreclosure procedures and review of foreclosure documents to ensure accuracy. It will push the mortgage companies for timely processing of loan modification applications. The current loan modification process have frustrated applicants who have been asked to submit the same documentation repeatedly and have to wait for months even a year or two for a denial or approval.
While the settlement earned the support of the Mortgage Bankers Association and the Center for Responsible Lending, it has its share of credits from the left and the right. Liberal groups complain that it does not go far enough in helping “underwater” homeowners. There are 11 million underwater homeowners but only 1.75 million will benefit from this settlement.
Other groups criticize the deal as unfair in that it benefits only a tiny number of underwater homeowners while the big majority of these problem loans will not get relief. The lone dissenter to the deal, Oklahoma Attorney General Scott Pruitt complains that those who are both underwater and delinquent can apply to reduce their loans while those who are underwater but current on their loans can only refinance their existing loans. He thinks that it could encourage homeowners to default on their loans to avail themselves of the principal reduction.