As you know, I’ve been upset with the lending industry for some time now!

That’s why I was absolutely thrilled when offices of the Attorney General for 49 of the 50 United States recently entered into a 26 billion dollar settlement agreement with the five banks that account for almost 60% of the loans serviced in the U.S.  (The only state not participating?  Oklahoma!)

This is an historic settlement, representing the largest consumer financial protection settlement in history.  And it all came about as a result of abuses and fraud in loan servicing.  In addition to providing relief for homeowners and borrowers, the settlement also provides for payments to state and federal governments.

It’s likely that one of your clients will be affected by the settlement.  Actually, given how tough things have been for many real estate agents, you may also be able to receive relief!

So what do you need to know about the $26,000,000,000 settlement?

Ally/GMAC, Bank of America, Citi, JP Morgan Chase, and Wells Fargo are the five lenders involved.

Now that the settlement has been reached, banks are beginning the work of determining who is eligible for relief.  Homeowners in all states except Oklahoma can participate, depending on their circumstances.

The settlement provides relief for homeowners in three categories:

1. Loan modifications, including principal reduction of both first and second mortgages.   Banks must provide up to $17 billion in principal reduction and other forms of loan modification.
2. Homeowners who are current on their mortgages, but are upside down in equity.  Borrowers in this category can refinance at today’s historically low interest rates.  Up to $3 billion of the settlement is targeted to this segment of borrowers.
3. Borrowers who lost their homes to foreclosure.    Up to $1.5 billion of the settlement will go to 750,000 former homeowners.  These claims are estimated to be approximately $2,000 per household.  And these individuals will not need to release either their private claims against the banks or their right to participate in future reviews – so they can pursue future action against their former lenders.

There is no cost to homeowners or borrowers to participate in the settlement.

Settlement negotiators will be selecting administrators to oversee the settlement, handle logistical details, and monitor compliance with the terms of the settlement.  That is expected to take 30 to 60 days.

Then, in the six to nine months which follow, three groups – the attorney generals of the 49 states, the mortgage servicers, and the settlement administrator – will identify homeowners eligible for a settlement.  Depending on which category the individuals fall in, that settlement will be in the form of immediate cash payments, principal reduction, and refinancing.

It’s estimated that it will take three years to fully complete the terms of the settlement.

Eligible homeowners should be contacted by the five participating banks.  However, individuals who are interested or concerned may wish to initiate the process by contacting the banks for more information.

Ally / GMAC…………………….. 800-766-4622

Bank of America……………….. 877-488-7814 (M-F 7:00 am to 9:00 pm Central Time and Saturday, 8:00 am to 5:00 pm)

Citi………………………………… 866-272-4749

JPMorgan Chase……………….. 866-372-6901

Wells Fargo……………………… 800-288-3212 (M-F, 7:00 am to 7:00 pm Central Time)

If someone lost their home due to foreclosure between January 1, 2008 and December 31, 2011 a settlement administrator will be in contact regarding restitution.  If someone may be difficult to locate, perhaps because they’ve made several moves and/or they don’t have a permanent place of address, they can contact their state’s Attorney General’s office.   If you’re not sure who that is, go to www.NAAG.org, and click on “The Attorney General”.  Scroll to the map of the United States, and hover over the black square located on your state.  The contact information for your Attorney General will appear in a pop-up box.

As I mentioned above, in addition to the financial assistance being offered to homeowners, the settlement provides:

• Immediate payments to the 49 states participating, to fund consumer and foreclosure protection efforts.
• The first-ever nationwide reform for mortgage loan servicing.
• Attorney General oversight of national banks at the state level.

While not a fix-all, the reform and oversight will definitely help in limiting future abuses.

Of course, a settlement this large creates opportunities for the less ethical among us!   Scammers are already contacting borrowers in an attempt to access personal information, and money.   Because there is no cost to borrowers to participate in the settlement, anyone claiming to represent a bank and describing fees involved in getting a claim processed is not a legitimate representative of the bank.  The banks already have all of its clients’ personal information; a request for additional details (such as social security number, account number, or bank routing number) is almost certainly not from an authorized representative of the bank.

It’s important to note that the settlement applies only to loans currently owned or serviced by the five participating banks.  If a loan is currently owned by Freddie Mac and Fannie Mae, an individual is not eligible under the terms of the settlement.

It’s easy to determine if a loan is held by Fannie Mae or Freddie Mac by visiting these two websites: http://www.fanniemac.loanlookup   and    http://www.freddiemac.com/mymortgage

If a loan is held by one of these organizations there are links on the site that direct individuals to information about programs they may be able to participate in.  This toll-free line – 1-888-995-4673 – also offers additional information.

Additional resources on the mortgage settlement can be located at:  www.nationalmortgagesettlement.com, www.HUD.gov, and www.DOJ.gov.

I think the settlement is a long-overdue step to acknowledge the shameful actions of many of our nation’s lenders.  But I want to know what you think!  Will the settlement impact you?  Your clients?  Do you see it as a hopeful sign … or does the timing of relief seem too far out to offer hope?  Leave your comments and thoughts below!

Note: Source material for this article came from www.nationalmortgagesettlement.com.