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February 26, 2014:
Some people are unhappy with the settlement. Banks and governments agree on mortgage settlement details. California joins settlement.

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Deadbeats?

For an alternate take, which calls rescued homeowners deadbeats, see the New York Post.

What are the details of the mortgage settlement? How many states are involved? What are the costs?

Millions of homeowners with troubled mortgages may be impacted

Mortgage SettlementMillions of homeowners who are facing foreclosure or who have upside down mortgages will benefit from the mortgage settlement announced in February 2012, but there are still a large number of underwater homeowners who are not going to see the relief they expected from banks and lending institutions. It should be noted that the settlement does not release banks from class action claims, lawsuits related to how mortgages were bundled into securities, or any criminal wrongdoing on behalf of the banks themselves. There can still be individual lawsuits brought against banks for specific cases of wrongdoing or illegal behavior. If more banks choose to participate in the settlement, the $25 billion price tag could rise to more than $40 billion dollars over the next three years.

Principal reduction, forclosure relief, and stretching the terms out on bank loans are several ways that are proposed to help the housing market. Whether you qualify for one or more of these programs of course depends on things like your income, your ability to pay, and your tolerance for red tape from parties who are determined to go through all the motions of helping you without actually getting results. In fact, some housing counselors now advise their clients to do a short sale or mail the keys back to the bank because there is such a small success rate in keeping people in their homes, despite all the promises of relief and modification. Banks make a lot of money collecting fees on late mortgages, so the longer they draw out the process the more money they make. They may only actually service the loan, so if it ends up in foreclosure it is not out any money. There is a perverse incentive to keep you in dire straits rather than offer you the help you need.

Notes and Special Information

Special note: If your mortgage is settled you may still see a change in your credit rating, but since people who missed payments get priority, your credit probably is not that great already. As it turns out, if you have a Freddie Mac, Fannie May, or FHA loan, you may not get any mortgage relief at all under the deal with the banks, but you may be able to get relief under a different deal if it is agreed to by the Obama administration.