The update following stems from the landmark settlement of $25 billion for homeowners. It requires the approval of a judge to be final. In a nutshell, if you are a homeowner with a primary residence and plan to stay in your home for 5 years or more, this is exceptional news if it applies. However, if you own income property and intend to sell soon, this action could influence comparable sales in a negative, downward trend.

The details that emerged in court filings on Monday: 

Among some of the aid outlined in the $25 billion settlement for home owners:

• Banks have agreed to pay about $20 billion to help home owners avoid foreclosure. The majority of that money will be allocated to reducing the mortgage principal and modifying loans for about 1 million underwater home owners. 
• Banks have agreed to pay $5 billion to federal and state government officials, with a portion of that money going to compensate about 750,000 Americans who have been found to be wrongfully foreclosed upon from 2008 through 2011. Affected home owners will receive $2,000 checks. 
• Banks will be required to adopt new processing standards for foreclosure. For example, banks will be unable to pursue a foreclosure when home owners are being considered for a loan modification. 
• Banks must comply with the terms of the settlement or face stiff penalties. Banks are required to complete all loan relief requirements as part of the settlement within three years; 75 percent of it is to be fulfilled within two years. Any bank that violates the agreement will be fined $1 million for each violation, capped at $5 million for repeat violations. 
• The settlement does not free banks from criminal action. Federal and state officials can still pursue criminal action action against banks for any wrongdoing over foreclosures.

The mortgage settlement only applies to mortgages held privately. It does not apply to mortgages held by Fannie Mae and Freddie Mac. The banks part of the settlement are Bank of America, Citigroup, JPMorgan, Chase, Wells Fargo, and Ally Financial.

The pre-Spring real estate market in San Diego is moving strong and healthy, so the settlement will not have an immediate impact on values.

$25 Billion Settlement for Homeowners

WHAT IS THIS? Like the golden ticket found in a select number of candy bars in Willy Wonka movies, there is a letter that may be delivered to your mailbox in March. If you have a mortgage that was originated by, or, is serviced by Wells Fargo, JP Morgan Chase & Co., Citigroup, Bank of America or GMAC/Ally Financial, you may qualify for a piece of this $25 billion agreement.

Word of caution, however: do not fall victim to fraud. With this level of money, we are bound to see scams. The easiest way to avoid a scam: no money will be requested by, nor required by these lenders to modify/re-finance/re-schedule your mortgage. The letters to be mailed will have the colors and logos of your bank statements. The letters will list a phone number at your bank for you to call and discuss conditions and qualification criteria which will determine if you are eligible. Right now there are pages of data with footnotes and fine print that describe the detail, which means there is no succinct method of disbursement.

WHY IS THIS? In a nutshell, U.S. Attorney Eric Holder, Department of Housing and Urban Development (HUD) and 49 state attorneys general (Oklahoma was the only holdout) reached a $25 billion settlement to address mortgage loan servicing and foreclosure abuses. This is the largest federal-state civil settlement ever. “This settlement will provide immediate relief to homeowners – forcing banks to reduce the principal balance on many loans, refinance loans for underwater borrowers, and pay billions of dollars to states and consumers,” according to the HUD Secretary Shaun Donovan. Additionally, the settlement shores up weaknesses in the system by requiring servicers to implement new mortgage servicing standards, freezing foreclosures on loans currently in modification status, and enhancing protections for U.S. service members.

WHEN? The servicers are required to fulfill the complex obligations within 3 years. I have been told this settlement applies to conforming loans ($697,500 through 09/30/2011 and $546,250 since 10/01/2011), and below, but that is not 100% clear.

It would not hurt to call your lender to discuss this settlement and how it might apply to you.

I really appreciate referrals. I understand you may not be in the position to buy or sell real estate at this time; you may not even be located in San Diego. However, if a family member, friend, neighbor or colleague is contemplating a move to San Diego County, I welcome the opportunity to speak with them.