HOW CALIFORNIANS CAN BENEFIT FROM THE NATIONAL MORTGAGE SETTLEMENT

Earlier today, the Federal Reserve announced that a $26 billion settlement had been reached with five of the nation’s largest banks and mortgage servicers.  Attorneys General from 49 states, including California, signed onto the settlement, which will provide new guidelines for banks related to foreclosures, loan modifications and refinancing of underwater owner-occupied properties.  While the settlement is not yet finalized and has not yet received court approval, our office has been proactive and contacted the California Attorney General and many of the banks involved in the settlement, as news accounts have little information about how our clients can benefit from this settlement.  The following is a general outline of the settlement provisions:

I.  ELIGIBILITY

To be eligible for the benefits of the settlement, a borrower’s loan must be owned or serviced by one of the five participating banks: Bank of America, Ally/GMAC, Wells Fargo, JP Morgan Chase, and City.  The loans must not be owned by Freddie Mac or Fannie Mae, which own a large number of loans in California.  In order to find out whether or not your loan is owned by Freddie Mac or Fannie Mae you may visit the following websites:
   
    http://www.fanniemae.com/loanlookup
    http://www.freddiemac.com/mymortgage

II.  RELIEF AVAILABLE

    A.  Compensation For Borrowers Who Lost Their Homes In Foreclosure

Borrowers who lost their homes to foreclosure between January 1, 2008, and December 31, 2011 will also be eligible for a payment from a $1.5 billion settlement fund, which has been estimated between $1,500.00 and $2,000.00 each to some 750,000 borrowers.   While the administrator who will be appointed to handle the settlement should send you a claims form, since your address has likely changed, you should contact the California Attorney General’s office in Sacramento (916) 445-9955 to forward your contact information. 

    B.  Loan Modifications

The settlement includes a $17 billion fund for principal reduction and other forms of relief.  An administrator will be selected in the next 30-60 days, and over the next 6-9 months an effort will be made to identify homeowners eligible for immediate cash payments, principal reduction and refinancing to be distributed over three years.  Borrowers needing loan modifications now, are encouraged to contact their lenders directly at the numbers listed below, even if you have sought a loan modification in the past and been turned down or are having difficulty making the payments:

Ally/GMAC: 800-766-4622

Bank of America/Countrywide: 877-488-7814

Citibank/Citimortgage: 866-272-4749

JPMorgan Chase/Washington Mutual: 866-372-6901

Wells Fargo/Wachovia: 800-288-3212

    C.  Borrowers Who Are Current, But Underwater–Refinancing and Short Sale

Refinancing to current historically low interest rates is available through $3 billion dollars in refinancing relief as part of the Settlement.  To qualify, the property must be under water and the interest rate must be at least 5.25%.  Again, borrowers should contact the lenders.  Borrowers with Fannie Mae and Freddie Mac loans may be eligible for the revised Home Affordable Refinance Program (“HARP”) discussed in my November 1, 2011 Journal entry:  http://www.mehlmanlawgroup.com/blog/revised-home-affordable-refinance-program

There are also funds in the settlement to facilitate short sale , or deeds in lieu of foreclosure followed by cash for keys to help the borrowers move.

    D.  Provisions To Regulate the Foreclosure Process

The Settlement also includes detailed provisions to restore integrity to the foreclosure process and to guaranty that banks make a determination on loan modifications quickly, inform the borrowers of any missing documentation, provide a single point of contact, notice of reasons for denial of modification requests, and that borrowers have an appeal from denials of modification requests.

III.  ADDITIONAL INFORMATION

The California Attorney General has set up a website explaining the settlement.  This website can be found at:

    https://oag.ca.gov/nationalmortgagesettlement

The national site explaining the settlement can be found at:

    http://www.nationalmortgagesettlement.com/

Even after the settlement is finalized and approved by the courts, the banks may take time to implement changes to their modification and refinancing programs, which will include reduction of principal in certain cases.  The banks we have spoken to have indicated that each borrower and the type of relief they may receive will be handled on a case by case basis.  In order to determine what type of relief you may be eligible for, you may either contact a free HUD-Approved Housing Counselor at (800) 569-4287.  We also recommend that you contact your lender directly at the phone numbers we have provided, above.