Did the Government Settlement with Major Banks Over Foreclosure Violation Ultimately Help Homeowners and Stop Future Foreclosures?
Last month federal regulators announced a settlement of $8.5 billion dollars with 10 major banks to satisfy claims of foreclosure proceeding violations. This breakdown is $3.3 billion in direct payments to borrowers. The remaining part of the settlement will go to such things as debt forgiveness and loan modifications totaling $5.2 billion. So how will this money really be used? - and more importantly, will it give you the help you need to stop a foreclosure on your home? If history is any indication of what may happen in the future, this mortgage relief may not be what it seems. This recent settlement is completely separate from the $26 billion dollar deal brokered last year by States Attorneys and the Justice Department against five major banks; it would seem to provide some insight for the future benefits of this agreement. Some of the banks are involved in both settlements. Throughout this housing crisis, the majority of defaults and foreclosures have been primary mortgages. Based on the fact that a majority of foreclosures involve first mortgages, it is surprising that the banks have only allocated 13% of the settlement dollars to aid homeowners struggling with a primary mortgage default. An astonishing 31% of the funds allocated towards the settlement are to assist homeowners with a second mortgage or home equity loan (source: New York Times, 2/13). Why is the above allocation of settlement funds bad you might ask? Because if the bank only provides relief on the second mortgage, but still pursues a foreclosure on the first mortgage, the homeowner will still likely lose their home. Even though the majority of the abuse revolves around first mortgages, the bank will still get "credit" towards the settlement when focusing on loan restructuring or debt forgiveness on the second mortgage. This imbalance seems to cast some questions as to the bank's motivation. Also, under the above scenario, the mortgage company can pursue debt collection on the primary mortgage after the foreclosure, making a bad situation worse. Don't rely on the banks to provide the help you need, there are other solutions. Our firm helps clients pursue one or all of the following benefits:
- Legally remove secondary liens (second mortgage, home equity loan, etc) on their homes
- Provide the opportunity to pursue a loan modification on the first mortgage with court oversight
- Reduction the principal amount owed on the first mortgage to current market value.
- Debt settlement or debt elimination if the home has become unaffordable and the only solution is to walk away.
Call us today at 866-261-8282 for a free consultation to understand your mortgage and debt resolution options.