The recent $25 billion mortgage settlement is the largest multistate settlement since the Tobacco Settlement in 1998. The mortgage settlement seeks to help those affected by the mortgage and foreclosure crisis. By helping those homeowners affected by the crisis, government leaders and bank officials hope to rectify mistakes made and to improve the housing market, which has crumbled since the start of the subprime mortgage crisis in 2008.
Understanding the Mortgage Settlement
The mortgage settlement was entered into between five banks – Ally Financial, Bank of America, Citibank, JP Morgan Chase and Wells Fargo – and the federal government after state and Federal investigations revealed that banks engaged in wrongful foreclosure practices between 2008 and 2010.
The investigations revealed that banks engaged in a number of illegal practices including signing foreclosure paperwork without the presence of a notary and without knowledge of the information actually contained in the documents.
Those who have or had loans settled by Ally Financial, Bank of America, Citibank, JP Morgan Chase and Wells Fargo may be eligible for funds through this settlement.
Who is Covered by the Settlement?
Collectively, the servicing banks involved in the settlement will make payments to state and federal governments that total $5 billion dollars. These funds will be used to make restitution to victims of foreclosure whose servicers did not abide by legal practices or provide adequate information to those whose houses they foreclosed upon.
Homeowners who had their homes foreclosed upon between January 1, 2008 and December 31, 2011 may be eligible for relief. Current estimates indicate that as many as 750,000 borrowers who were foreclosed on could receive as much as $1,500 – $2,000 in restitution. If the next nine largest servicing banks become a part of this settlement, additional funds could become available.
In addition to the funds included in the $25 billion dollar settlement, these five servicers have agreed to investigate and determine if any servicemembers were wrongfully foreclosed on under the terms of the Servicemembers Civil Relief Act. If it is determined that a wrongful foreclosure has taken place, funds for lost equity, interest and additional damages will be provided to the victims.
Additional Legal Actions
Acceptance of the funds under this settlement does not prevent victims of wrongful or illegal foreclosure practices, from suing their mortgage provider either independently or as a part of a class action lawsuit.
An earlier settlement between the government and 15 loan servicers may also provide relief to some through facilitating Independent Foreclosure Review. This involves an investigation and possible restitution for those who should not have lost their homes to foreclosure. More information on that settlement can be obtained at Independent Foreclosure Review.com.
Getting Help
While the new $25 billion settlement has been announced, homeowners cannot yet begin seeking relief through this latest settlement. Over the next year, a program administrator will be named and the identification of those affected by this settlement will be notified by mail as administrators, attorneys general and mortgage servicers work together to determine who is eligible for investigation and the receipt of funds. Contact your state attorney general’s office for specific questions regarding how the settlement will work in your state.