You may have heard that there was a recent settlement between numerous banks and attorneys general of 47 states, as "punishment" for the whole robo-signing/forged documents scandal that's plagued the foreclosure process for the previous few years. We've been getting a lot of questions about it, mostly because of the sizeable settlement amount--$25 billion--which is being hailed as a huge victory for homeowners, a savior of our economy, and a victory of righteousness over the evils of bank shanenigans. Oh...they're also saying it will be used to reduce homeowners' mortgage balances.
Before you start hailing victory, there are a number of things you should know about this great "victory."
The fist thing to know about the settlement is that foreclosures will increase. That's right. Increase. Many banks had been purposely delaying or slowing foreclosures while this settlement was being negotiated. Now that it's completed, you can expect to see many of these cases pressing forward much faster, or people who haven't been sued, being sued for foreclosure. The settlement did not prevent or bar anybody from foreclosing.
Second, the total settlement dollars are underwhelming, despite the seemingly large total amount. If you've already lost your home, the government and the banks wish to extend to you their most sincere apology, in the form of a whopping $2,000. Yes, more than 2 million owners have lost their homes to foreclosure during the last four years; this deal will provide 750,000 with a payment of $2,000 each.
What if you're still in your home? Well, if Fannie Mae or Freddie Mac have any interest in your property, you're not included in the settlement at all. That includes the majority of you, but if you're curious, you can go http://www.fanniemae.com/loanlookup/ or https://ww3.freddiemac.com/corporate/ to check if they own your loan. And, your property must be serviced by Bank of America, JPMorgan Chase, Wells Fargo, Ally Financial or Citigroup (that means, if you're in a foreclosure, don't look at your foreclosing Plaintiff, look at who sends you letters, bills, or correspondence).
Still in the game? Well if so, hang on. In Florida, 7.6 billion has been allocated to those of you with properties that are underwater (that's upside down in value), if you've already fallen behind. If you're current, you won't get a principle reduction but may qualify for a refinance.
So...you qualify for a principle reduction after all this....ready for the payoff? Ok. Florida has about 1.9 million homes currently underwater, and the average homeowner is underwater by $65,000, meaning Florida's negative equity total comes in at more than $123 billion. Except Florida's only getting 7.6 billion. The numbers aren't clear yet, but most estimates are that if you qualify, you'll get about $20,000 in principle reduction. So, you'll still be upside down, probably considerably so, although admittedly for some, it still may be enough to convince them their home is worth keeping.
(Incidentally, for those of you thinking of voting Republican anytime in the future, your Republican Attorney General, Pam Biondi, lobbied against inclusion of principal reduction as part of the settlement. Thank goodness, she lost.)
Anyway, the bottom line is that I'm sure that this settlement will finally put an end to the bank's days of fuzzy math and fudging numbers and falsifying information, now that they were forced to pay Florida 8.4 billion (http://myfloridalegal.com/pages.nsf/Main/94816CAD8E86B0778525799F00595D98), and California 18 billion (http://oag.ca.gov/news/press_release?id=2625), which together equals the sum total of 26.4 billion. On a settlement that was officially being announced as a total of 25 billion dollars. Oh...and that was for 47 states....
Wait a minute....