The National Mortgage Settlement requires that certain banks provide extensive relief to borrowers in the form of loan modifications, refinancing, and even cash payouts. If you have a mortgage serviced by Ally/GMAC, Bank of America, Citi, JPMorgan Chase, or Wells Fargo, you might be eligible for a loan modification, refinancing, or a cash payout. Even if your mortgage is with another bank, you might get help under the Independent Foreclosure Review.
Read on to learn more about the National Mortgage Settlement, who is eligible for relief under the settlement, the types of relief available, and how to make a claim under the settlement if you qualify.
The National Mortgage Settlement
Over the past few years, state and federal investigations into mortgage foreclosure activities revealed extensive mortgage servicing misconduct, including:
- robosigning (where foreclosure documents were signed by people who had no knowledge about whether the information contained in the documents was correct)
- inaccurately notarized documents
- improper foreclosure procedures, and
- deceptive practices in the loan modification process (such as telling borrowers that a loan modification was imminent while simultaneously foreclosing).
As a result of these investigations, in February 2012, 49 state attorneys general and the federal government reached a historic settlement with five of the nation’s largest banks. The settlement held them accountable for the servicing violations that contributed to the mortgage crisis in this county.
The National Mortgage Settlement provides up to $25 billion in relief to current and former homeowners.
Who Can Benefit From the Settlement
The settlement benefits are for those borrowers whose loans are owned or serviced by the following five major loan servicers:
- Bank of America
- JPMorgan Chase, and
- Wells Fargo.
To find out who your mortgage servicer is, look at your mortgage payment coupon. The company that you make your monthly mortgage payment to is your mortgage servicer (which may be different than the owner of your loan).
Fannie Mae and Freddie Mac loans are not a part of the settlement. If you loan is serviced by one of the servicers above, but owned by Fannie Mae or Freddie Mac, you are not eligible for benefits under the settlement. To find out if either Fannie Mae or Freddie Mac owns your loan, go to www.knowyouroptions.com/loanlookup and www.freddiemac.com/mymortgage .
Borrowers in Oklahoma are not covered. Borrowers from Oklahoma are not entitled to any of the relief provided for in the settlement because that state elected not to join the settlement.
Relief Provided by the Settlement
Here are some of the remedies that you might be entitled to under the settlement.
Loan Modifications for Struggling Homeowners
The settlement provides assistance for struggling homeowners in need of a loan modification, including first and second lien principal reductions. Lower principal balances result in lower payments, thus allowing homeowners a chance to retain their property.
Notification. Lenders will notify borrowers who are eligible for loan modifications. However, if your loan is serviced by one of the five settling banks, you are encouraged to find out if you are eligible by contacting your servicer directly at:
Bank of America: 877-488-7814
JPMorgan Chase: 866-372-6901
Wells Fargo: 800-288-3212
Refinancing for Underwater Homeowners
Homeowners who are current on payments, but whose property value is underwater (where the amount owed to the lender is more than the home’s fair market value), are also eligible for relief.
Eligibility for refinancing. To qualify, a borrower must:
- be current on mortgage payments
- have a loan to value ratio in excess of 100% (be underwater)
- have a current interest rate that is above 5.25%, and
- the refinanced rate must reduce the monthly payment by at least $100.
Notification. The banks are required to notify eligible borrowers about this program. However, if your loan is serviced by one of the five settling banks, you are encouraged to contact your servicer to see if you are eligible.
Cash Payouts for Borrowers Who Lost Their Homes
Homeowners who lost their homes because they were not properly offered loss mitigation options or were otherwise improperly foreclosed on between January 1, 2008 and December 31, 2011 are eligible for cash payouts from a $1.5 billion fund.
Amount of the payout. There are approximately 750,000 borrowers who are eligible for a payout, which means each claimant will likely receive approximately $2,000. However, the actual amount received will vary based on how many claims are filed.
Filing a claim. Borrowers will be notified by letter of the right to file a claim. The National Mortgage Settlement Administrator will mail the notice letters and claim forms to borrowers in late September to early October 2012. Homeowners who do not receive a notice letter and form, but believe they should have, can contact the National Mortgage Settlement Administrator at 1-866-430-8358.
Deadline for filing a claim. The deadline to make a claim is January 18, 2013.
Borrowers Not Eligible for Assistance Under the National Mortgage Settlement
If you are not eligible for benefits under the National Mortgage Settlement, you may be entitled to relief under the Independent Foreclosure Review. The Independent Foreclosure Review is a separate program that was implemented by federal banking regulators to provide restitution to borrowers harmed in the foreclosure process in 2009-2010.
Eligibility for an independent foreclosure review. You can qualify for a free review if:
- your mortgage loan was active in the foreclosure process between January 1, 2009 and December 31, 2010
- the property was your primary residence; and
- your mortgage loan was serviced by one of the twenty-seven participating mortgage servicers.
For more information, to check your eligibility, or to request a review, go to https://independentforeclosurereview.com.
The National Mortgage Settlement and Independent Foreclosure Review are not mutually exclusive. Even if the National Mortgage Settlement offers you relief, you may also participate in the Independent Foreclosure Review.
More Information on the National Mortgage Settlement
To learn more about the National Mortgage Settlement, go to http://nationalmortgagesettlement.com/ or contact your mortgage servicer.