Brand New Settlement Plan
See how it will change how banks operate
Remember way back when in 2008 when the banks were performing abusive and negligent foreclosure practices? Well reparations have begun friends. This new article on CNN Money tells all. Under a new deal announced on Thursday the “banks will commit $26 billion to help underwater homeowners” and this money will also compensate those who had to give up their homes because of the banks’ improper foreclosure practices.
As a part of this deal, banks have also agreed to change how they handle their business, particularly the way they handle and approve foreclosures. We all know that banks have dealt a lot of terrible hands to homeowners, but how did they accomplish it? According to a group of state attorney generals “banks lost important paperwork, cut corners and enlisted robo-signers to attest to facts they had no knowledge of”. The disturbing nature of this is not just the bank’s actions, but also the grand scale on which they performed their bad business practices. Banks cut corners and lied about facts they weren’t sure of on hundreds of documents every day putting people out of their homes.
On the other side of this settlement, the “banks and servicers have committed at least $17 million to reduce principal for borrowers who owe far more than their homes are worth and/or are behind on their payments”. They averaged out the actual principal reduction and it comes out about $20,000 per borrower.
Some other key points of this new deal are as follows:
- · $3 billion goes toward refinancing mortgages for borrowers who are current on their payments so they are able to take advantage of historically low interest rates available.
- · Banks will pay $5 billion to states and the federal government – out of that fund comes $1500 to $2000 payments to homeowners who lost their homes to foreclosure.
- · $1 billion will be paid by Bank of America to the Federal Housing Administration. This payment from B of A will settle charges of Countrywide Financial, its subsidiary defrauded the housing agency
· And, you’ll never believe it, banks have agreed to eliminate robo-signing entirely and to only use legal procedures in the foreclosure process.
Banks that are taking part in this settlement include Bank of America, Wells Fargo, JP Morgan Chase, Citigroup and Ally Financial among others. “Nine other unnamed loan servicers may join the settlement later” bringing the value up to $30 billion. The only loans that wouldn’t be covered by this new deal are loans owned or backed by Fannie Mae and Freddie Mac, but Obama is currently working on a new home loan refinancing program to cover these.
A concern that many borrows have with this program, however, is the rights they may have to give up if they accept the money. The good news is that “individual borrowers do not give up any right to sue” and criminal prosecution of these larger banks is still an option. Also if the principal is reduced this year it also won’t be subject to income tax.
Another huge concern is if the settlement is expected to make getting a loan even more difficult. According to the actual settlement the “new rules and regulations the banks have agreed to should have little impact on future mortgage borrowing since most practices are already in place”.
“HUD said the settlement will be put before a court for approval within two weeks” but it’s unknown how long it will take the court to rule.
For the whole article and more information click the link to CNN Money and read on.
Lynn F. Tardibuono – Flipper Chick and Real Estate Agent at Sun Pacific Mortgage and Real Estate in Sonoma County since 1988.