National Mortgage Settlement: Answers to your top questions

The National Mortgage Settlement has been a hot topic lately — and understandably so. With $25 billion up for grabs, struggling homeowners — and those who have already lost their homes to foreclosure — want to know more about the potential financial help that will be available.

Unfortunately, due to the complex nature of the mortgage market and this program — which will be performed over a three-year period — borrowers will not immediately know if they are eligible for relief.

Settlement negotiators are currently in the process of choosing administrators to handle the logistics of the settlement. Once that phase is complete, the settlement administrator, attorneys general and the mortgage servicers will work to identify homeowners eligible for the immediate cash payments, principle reductions and refinancing.

According to the Attorneys General Executive Committee, those who are eligible will receive a letter in the mail. Keep in mind, the settlement will be executed over the course of three years, so don’t panic if you don’t receive a letter immediately. You can also contact your servicer directly to discover if you are eligible.

In the meantime, the following are some of the top Frequently Asked Questions, courtesy of NationalMortgageSettlement.com — the official website for the program. Refer to this site for the most accurate, up-to-date information straight from the program officials.

Q: How will I know whether this settlement affects my situation?

A: Only homeowners in the states who joined the settlement are eligible for benefits under this settlement. Borrowers from Oklahoma will not be eligible for any of the relief directly to homeowners because Oklahoma elected not to join the settlement. Because of the complexity of the mortgage market and this agreement, which will be performed over a three year period, borrowers from the settlement states will not immediately know if they are eligible for relief.

• For loan modifications and refinance options, borrowers may be contacted directly by one of the five participating mortgage servicers.
• For borrowers who lost their home to foreclosure between Jan. 1, 2008, and Dec. 31, 2011, a settlement administrator designated by the attorneys general will send claim forms to persons eligible for cash restitution.

Even if you are not contacted, 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.

In any event, borrowers may contact their mortgage servicer to obtain more information about specific loan modification programs and whether the borrower may be impacted by this settlement. You may reach them at the websites and phone numbers below:

• 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

More information will be made available as the settlement programs are implemented. For more information on the proposed agreement, visit:

• HUD.gov
• DOJ.gov

A: No. To qualify for the Consumer Relief portion of the settlement, the home must be occupied but there is no requirement that the owner of the home be the occupant. This is different from past settlements

Q: What about those of us who keep making our mortgage payments?

A: Borrowers who are current in their payments but are “underwater” on their mortgages may qualify for refinancing relief under the settlement.

Beyond that, the mortgage servicers involved in this settlement broke the law, the conduct harmed borrowers, and this settlement addresses that conduct. If the mortgage servicers followed the law, many foreclosures likely could have been prevented. Foreclosure has a profound impact beyond the borrower and the creditor. A foreclosure affects homeowners, families, neighborhoods, communities, the housing market and our overall economy.

When a house is subject to foreclosure, it creates a ripple effect that lowers the value of nearby single-family homes and other properties. In 2009 the Center for Responsible Lending projected that homeowners living near foreclosed properties, on average, would lose $7,200 in property value, and projected a four-year increase in losses to $20,300 per household.

Foreclosures contribute to unstable family and social environments. They increase stress on homeowners, their families and their neighbors. These deteriorating, neglected properties and neighboring property value losses create neighborhood blight, cut a community’s tax base, and can contribute to crime. Displaced homeowners put other stresses on communities, including the need for shelter and social services. Foreclosures affect everyone and affect our economy – even those who play by the rules and pay their monthly mortgage on time.

Q: A majority of mortgages are unaffected by this settlement. When will you work to obtain relief for the vast majority of homeowners?

A: This settlement primarily affects mortgages that are owned and held by the nation’s largest bank servicers. Those homeowners may receive benefits such as modifications, principal reductions or direct payments from lenders.

Two government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac, control a majority of the nation’s mortgage loans. GSE loans are not eligible for parts of this settlement because of positions their regulator, the Federal Housing Finance Administrator (FHFA), has taken.

However, homeowners with GSE-controlled mortgages who won’t directly benefit from settlement-related programs – that’s most of us – will still see benefits through reduced foreclosures, stabilizing home values and significant new mortgage servicing standards and consumer protections.

This settlement, in addition to recent federal efforts to modify Freddie and Fannie loans, means that the majority of distressed borrowers might qualify for some level of help.

Q: Will there be payments to foreclosure victims?

A: Yes. Approximately $1.5 billion of the settlement funds will be allocated to compensation to borrowers who were foreclosed on after January 1, 2008, and before Dec. 31, 2011. These borrowers will be notified of their right to file a claim.

Borrowers who were not properly offered loss mitigation or who were otherwise improperly foreclosed on will be eligible for a uniform payment, which will be approximately $2000 per borrower depending on level of response.

Borrowers who receive payments will not have to release any claims and will be free to seek additional relief in the courts. Borrowers may also be eligible for a separate restitution process administered by the federal banking regulators.