National Mortgage Settlement: Can You Benefit?

If you had or have a mortgage serviced by Ally/GMAC, Bank of America, Citibank, JPMorgan Chase, or Wells Fargo, you might get mortgage relief under the National Mortgage Settlement.

The National Mortgage Settlement of 2012 required that certain banks provide extensive relief to borrowers in the form of loan modifications, refinancing, and even cash payouts. Borrowers with a mortgage serviced by Ally/GMAC, Bank of America, Citi, JPMorgan Chase, or Wells Fargo, might receive a loan modification, refinancing, or a cash payout under this settlement.

Read on to learn more about the National Mortgage Settlement, who is eligible for relief under the settlement, and the types of relief provided.

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:

Ally/GMAC
Bank of America
Citi
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. (Oklahoma made its own agreement with the five servicers. Go to www.oag.ok.gov and click on "Oklahoma Mortgage Settlement Information" on the right-hand side of the screen for more information.)

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:

Ally/GMAC: 800-766-4622

Bank of America: 877-488-7814

Citi: 866-272-4749

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.

Servicers are reportedly near completion of the required relief in regards to loan modifications and refinancing. (Chase has announced that it believes it has already met the settlement refinancing requirements.)

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 were eligible for cash payouts from a $1.5 billion fund.

Amount of the payout. Borrowers who submitted a valid payment claim form through the National Mortgage Settlement will receive a check for approximately $1,480. Checks went out between June 10, 2013, and June 17, 2013. (The deadline to make a claim was January 18, 2013.)

Nationwide Reforms Required by the Settlement

The settlement requires, among other things, that the banks:

appoint a single point of contact for loss mitigation efforts
have adequate staffing levels and training
honor trial and permanent loan modification agreements by a prior loan servicer
maintain better communication with borrowers
comply with the Servicemembers Civil Relief Act
implement appropriate standards for executing documents in foreclosure cases
end improper fees, and
end dual tracking (where the bank proceeds with foreclosure while simultaneously working with the borrower on a loan modification).