I have mixed feelings about the proposed mortgage settlement announced recently. One key element I think will help, is the option for Homeowners who do not qualify for current refinance programs, sponsored by Fannie Mae/Freddie Mac the ability to refinance their loans even if they owe more than the property is worth. This option will help stimulate some economic activity. If borrowers are allowed to refinance, they will save anywhere from $100 to $1000 per month based on today’s interest rates. Some of this money undoubtably will make it’s way back into the economy.
The details have not been officially announced yet so it is hard to say who will qualify for help and how much. What we can say, the banks that agreed to this settlement will have 3 years to get this done.
Key Components on a National Level
1. $17 Billion to borrowers who intend to stay in their property and have the ability to repay the loan. $10.2 Billion of this must be allocated to reduce the principal balance of loan for borrowers who are in default or are in risk of default. Another 5.2 Billion will go to homeowver assistance. This includes short sales, deferring payments for homeowners who are unemployed, waving defieciency balances and other options.
2. Refinancing Underwater Homes- If you are current on your payments but can’t refinance because of negative equity there will be a $3 billion pool of funds available to help. To qualify you must have a loan to value ratio in excess of 100% and a current interest rate that exceeds 5.25%.
Analysis- What about homeowners who have a LTV of 90% ? If their loan isn’t owned by Fannie Mae or Freddie Mac they don’t have any options to refinance. I don’t think it is equitable to penalize someone who may have put down 20-30-40%, they may not have negative equity since they were financially responsible. However they won’t be able to refinance to lower rates ? This hardly makes sense.
What is in it for California Homeowners ?
On February 9, Attorney General Kamala D. Harris announced that California secured up to $18 billion for its distressed homeowners as part of a $25 billion national multistate settlement with the country’s five largest loan servicers. More than $12 billion will be used to offer short sales or write down loans over the next three years for about 250,000 underwater homeowners in California, according to the attorney general. Relief will go to areas hardest hit by the foreclosure crisis within the first year of the settlement.
Although the actual settlement has not yet been released, the attorney general has stated that other financial benefits for California include $849 million for refinancing 28,000 borrowers who are underwater but current on their payments; $279 million restitution for 140,000 homeowners who were foreclosed upon between 2008 and 2011; $1.1 billion for unemployed homeowners, transitional assistance, and repairing blight; $3.5 billion to extinguish unpaid loans that remain after foreclosure for 32,000 homeowners; and $430 million to the state attorney general’s office for costs and fees. As part of a California guarantee, if the lenders fail to reduce principal balances by a minimum of $12 billion, they will be required to pay fines up to $800 million to the state.
The loans involved in this settlement are those owned or serviced by Bank of America, JPMorgan Chase, Wells Fargo, Citigroup, and Ally Financial Inc. The settlement releases the five named lenders from certain federal and state claims pertaining to robo-signing and other foreclosure misconduct by the lenders. It does not affect any individual’s rights to bring legal action against a lender. It also does not apply to the majority of mortgage loans, which are those owned by Fannie Mae or Freddie Mac.
This mortgage settlement does not change any homeowner’s existing financial relationship with a settling lender. It does not relieve homeowners from any obligation. It does not require a settling lender to stop any foreclosure.1
Download a Copy of – National Mortgage Settlement Executive Summary
For More Information Visit the Following Websites
Source : California Association Of Realtors