By Sandra Guy
February 9, 2012
Just because you are behind on your mortgage payments or owe more on your home than it is worth doesn’t mean you will see relief from a historic $25 billion settlement that federal officials and state’s attorneys general announced Thursday with the nation’s five largest mortgage lenders.
The settlement, which seeks to hold the lenders accountable for mortgage fraud and abuse, is filled with complex details and may take three years to fulfill.
But it requires the banks to identify which borrowers get help and to try to contact them. It also requires the banks to provide a single point of contact throughout the process.
The five lenders are Ally Financial (formerly known as GMAC), Bank of America, Citigroup, JP Morgan Chase and Wells Fargo.
Loans owned or backed by Fannie Mae and Freddie Mac play no part in the settlement.
The money will be used to help refinance certain borrowers’ mortgages into lower interest rate loans and to provide restitution averaging $1,500 to $2,000 to certain borrowers who lost their homes to foreclosure from 2008 until year-end 2011, among other assistance.
Critics say the amounts are a drop in the bucket of the devastation wreaked on millions of families, and especially people of color.
Illinois is expected to receive about $1 billion of the total.
More than 380,000 homes in the Chicago region were worth less than the owners paid for them, and another 78,700 were on the verge of being underwater, as of Sept. 30, 2011, the latest published data, according to the Woodstock Institute, a Chicago nonprofit that works for fair lending and financial reform. The average underwater borrower locally owes $61,000 more than the value of his or her home, according to the Woodstock Institute.
“How the money is divided and whether it goes to areas hardest-hit by the foreclosure crisis will determine how well it stabilizes local housing markets,” said Tom Feltner, Woodstock’s vice president.
Illinois Attorney General Lisa Madigan, who was active in the negotiations and appeared at a Washington, D.C., press conference announcing the settlement Thursday, has set up a hotline to help homeowners figure out where they stand.
The Homeowner Hotline is 1-866-544-7151.
Details also are on the website www.illinoisattorneygeneral.gov/consumers/bankforeclosuresettlement.html.
Homeowners who can expect help fall into three categories:
† Homeowners who lost their homes to foreclosure between January 2008 and this year who can show they were victims of robosigning, lost paperwork or other unsavory practices during their foreclosure or loan modification. Borrowers who foreclosed are eligible for cash payments.
† Borrowers who are behind on their payments or who are about to default may be eligible for reductions on their principal on first and second mortgages.
† Borrowers who have remained current on their mortgages but who cannot refinance may be able to obtain a mortgage refinancing.
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