$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.