Home > Avid Law Center, Foreclosure, Underwater > Mortgage Settlement Filed in Court This Week Still Leaves Homeowners Outraged

Mortgage Settlement Filed in Court This Week Still Leaves Homeowners Outraged

The details of the multi-billion dollar mortgage settlement between 49 state attorneys general and the nation’s five largest banks were filed this week in court. However millions of homeowners will still be left without aid.

Proponents of the settlement estimate that roughly 1 million underwater homeowners will receive aid in the form of principal reductions and another 750,000 homeowners will be able to refinance their loans to lower interest rates. CoreLogic, however, states that this is just a fraction of the 11 million homeowners who are currently underwater.

CNNMoney.com reports:

“Principal reductions will also only apply to certain borrowers who have mortgages still held by the five major lenders: Bank of America, CitiBank, Wells Fargo, J.P. Morgan Chase and Ally Financial.

Borrowers who have a mortgage held by Fannie Mae or Freddie Mac — roughly half the market — are out of luck. Loans insured by the Federal Housing Administration are also ineligible.”

Unfortunately for many homeowners most loans are not retained by the original lenders. So if a borrower enters into a mortgage agreement with a bank, their loans are often sold to Fannie or Freddie and borrowers aren’t given a choice when their loans are sold.

Distressed homeowners throughout the country are outraged at the inequality the settlement offers. For the homeowners who bought responsibly and made their payments faithfully, the unfairness comes in the fact that their tax dollars are paying for government-funded programs to prevent foreclosures while irresponsible borrowers accrue the benefits like the ones offered in the settlement.

Additionally, some borrowers may qualify for much larger reductions than others, as well.

CNNMoney.com states:

“Bank of America, for example, said it will slash mortgage balances by an average of $100,000 or more for roughly 200,000 homeowners. The goal, according to BofA, is to reduce the amount owed on the home to 100% match the current market value. Meanwhile, the other four major mortgage lenders, CitiBank, Wells Fargo, JPMorgan Chase and Ally Financial, are expected to reduce qualified borrowers’ principal to between 115% and 125% of the value of their homes — an amount that the Department of Housing and Urban Development said should average about $20,000.”

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