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Mortgage deal questions answered

By Polyana da Costa ·
Friday, February 10, 2012
Posted: 2 pm ET

Since the $25 billion mortgage settlement with five of the nation's largest banks was announced, borrowers across the nation wonder if or when they will benefit from it.

"This historic settlement will provide immediate relief to homeowners, forcing banks to reduce the principal balance on many loans, refinance loans for underwater borrowers, and pay billions of dollars to states and consumers," says Housing and Urban Development Secretary Shaun Donovan.

Sounds good. But there is nothing "immediate" about this settlement.

It will take six to nine months to identify borrowers who are eligible to benefit from the settlement. And the five lenders that participated in the settlement -- JP Morgan Chase, Bank of America, Citibank, Ally Financial and Wells Fargo -- have up to three years to fulfill the agreement. That doesn't mean nothing will happen for three years. But it will be a long process before former homeowners start getting checks in the mail or borrowers receive refinance offers under this agreement.

Now, here is what borrowers may get within these three years:

  • If you lost your home to foreclosure between Jan.1, 2008, and Dec. 31, 2011: You may receive about $2,000. The check won't magically appear in your mailbox. First, the settlement administrator will send claim forms to those who are eligible. It's not yet clear who will be eligible for compensation. Officials say borrowers who were "not properly offered loss mitigation or who were otherwise improperly foreclosed" will be eligible. About 750,000 people could receive checks.
  • If you are current on your mortgage but owe more than what your house is worth, you may qualify for refinancing relief under the settlement: The settlement provides up to $3 billion to refinance underwater homes. To qualify, you would need to be current on payments and your mortgage must be owned by one of the five banks in the settlement. If your loan is owned by Fannie Mae or Freddie Mac you don’t qualify, even if one of these banks services your loan. And if your loan is owned by investors, it will depend on the agreement the servicer has with the investors. These lenders don't own most of the mortgages they service, which is why this agreement helps only a limited number of borrowers.
  • If you can't afford your current mortgage payment but would be able to make payments on a smaller loan: You may be eligible to participate in the principal reduction program in this settlement, which provides $17 billion for foreclosure relief efforts such as short sales and write-downs. Again, loans owned by Fannie and Freddie don't qualify. According to the settlement announcement, "mortgage servicers have three years to reach loan modification targets and fulfill refinancing commitments. Servicers must reach 75 percent of their targets within the first two years."

I'm not sure how this is going to work. If you can't afford payments, how are you supposed to wait two years to have your loan modified? Maybe when the actual settlement documents are approved by the court and released to the public we'll have that answer. I hope.

If you want me to keep you posted on this, follow me on Twitter @Polyanad

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April 04, 2012 at 9:46 pm

Okay, for the the article wrote above. Anyone who is not Fannie or Freddie good luck trying to refi with Bank of America. You got it right on when said the major banks have up to three years to fullfill the agreement. No Hope program or streamline refi will qualify, as of now nothing has changed for the people who have there loan with anyone other then Fannie and Freddie or a FHA loan The 25 Billion doller settelment will not happen to underwater mortgages anytime soon. Here we sit again, playing the waiting game. This was false hope again delivered by Obama.

March 15, 2012 at 2:00 pm

I am curious about 1st and 2nd mortgages. I have a 1st mortgage with B of A and a 2nd mortgage that is with a local credit union. We purchased our house 6 1/2 yrs ago with an 80/20 loan. The total of both loans is much greater than the value of our house. The first mortgage alone is about the same as the value of our house. Is this settlement able to include both the 1st and 2nd mortgages when considering loan to value?, even if the 2nd is not with one of the big banks involved with the settlement?

March 12, 2012 at 1:06 pm

With all the rules in place to help, none really help the homeowners in good standing on their first and second mortgage. While one may be able to refi the first, they are not allowed under any program, to roll their second in with their first. Maybe I'm missing something, but there are millions with a first and a second who will not be able to benefit.

February 29, 2012 at 11:22 pm

We are in the situation of being current on our BOA loan at 8.5% interest with a extended ARM. This is a rental property. We are unable to to refinance because we took out a rental rehab loan with our city at 2% for 20,000 and now we are underwater due to falling property values. We are not owned by Fannie may or Freddie. We have contacted BOA several time over the past three years and have never been able to refinace because we needed to be Freddie may or Fannie. Now this is something hopefully for us. We are losing out on so much money not being able to take advantage of these low interest rates. I really hope this 2nd mortage we have is concidered different then a home equity loan...every bit of it went back into the home, not to pay off credit cards or buy a boat. When do the middle class people who pay there bills get a break!

rich pfannenstiel
February 13, 2012 at 7:00 pm

i will retire when i'm 62, three years from now,would it be wise to pay off my mortgage of $45,000.00,my apt. payment is $140.00 a month now but in 4 years it goes up to $ 400.00 a month for the next 20 years. i never have collected taxes on it evry year because i do'nt have that much to deduct but if i paid it off ,could i collect by filing long form?...thank you.

February 11, 2012 at 12:20 pm

I have a Investment property 3 units the loan is with WELLS FARGO, I tried to modify the loan my rate is 7.5% after sending them evry piece of info to (WELLS FARGE) I was denied the loan modification. I asked WELLS FARGO if I lower my mortgage balance by $200,000 (get the money from a relative) and get a new loan from WELLS FARGO at the prevailing rate I was told the only way they will give me a loan if I supply all documentation plus they need to pull my credit, At this stage of life I am retired I closed my business exausted all my savings and my credit is tarnished i don't qualify for a mortgage going thru regular chanel full doc. and credit report. My question is if A person is able to pay higher rate and larger mortgage balance whey WELLS FARGO does not give a new loan lower mortgage and interet rate? without any documentation?. If I sell the property after I pay the mortgage balance I will owe big capital TAX to IRS and the State and I don't have any money to pay the TAXES.

February 10, 2012 at 7:00 pm

I heard on the news that something was in the works for people who were victims of mortgage help scams, to be able to get help also. my daughter was scamed and in the end lost her home. it was worth no where near what they paid for it and it was also a fannie mae but was serviced through a different mortgage company who after almost two years and a bad scam by an attorney they could not do anything for her except lower payment 200.00 a month and add all back payments to end of loan and reduce interest by 1%. the scammer took 3000.00 up front to help and did nothing.