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What the Mortgage Settlement Means to You

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American homeowners can breathe (a small) sigh of relief. The U.S. announced a $25 billion deal Thursday with the nation's largest banks - after more than a year of bickering and about-faces - that would provide some help for people struggling to pay their mortgages. The settlement comes after evidence emerged late in 2010 that banks robo-signed thousands of foreclosure documents without properly reviewing paperwork. The Obama administration hopes the pact will open a new avenue for housing relief because it will force the banks to write down mortgages at a time when roughly one in four borrowers owe more on their mortgage than their home is worth.
"Turn the page" on "recklessness" and abusive practices by banks that led to the housing crisis, President Barack Obama told reporters in remarks at the White House after the deal was announced. The settlement has been billed as complementing other government programs designed to boost the housing market that has been a drag on the economic recovery, a key issue for Obama as he fights for re-election in November.
"We have reached a landmark settlement with the nation's largest banks that will speed relief to the hardest hit homeowners,'' Obama said. He also urged Congress to take action on some other proposals aimed at aiding homeowners, including one to help underwater borrowers who are current on their payments refinance their mortgages. The Obama administration has estimated that up to 1 million homeowners could benefit from the deal through mortgage writedowns and other forms of relief. The New York Times said another 750,000 people who lost their homes through foreclosures between January 2008 through the end of last year will get a $2,000 check. The aid will be doled out over three years, the Times said. The core group of banks involved in settlement talks are Bank of America Corp, Wells Fargo & Co, JPMorgan Chase & Co, Citigroup Inc and Ally Financial Inc. Forty-nine states joined the settlement in advance of a Feb. 6 deadline, but several states continued negotiations to address concerns specific to their state. The deal was clinched after California and New York joined at the last minute. Oklahoma was the lone holdout and will get no funds. Although the deal with 49 states is the largest joint federal-state settlement ever obtained, the amount is minuscule compared to the declines in home values and the banks still face a host of other mortgage-related lawsuits. "The bottom line about this settlement, is it's okay, it's a step forward, it's a step in the right direction. But let's not kid ourselves, there's a hell of a lot more that needs to be done," said Ira Rheingold, executive director of the National Association of Consumer Advocates. The deal does little to ease bank investor fears, industry analysts said. "We believe any initial euphoria over the deal will quickly fade as investors realize the flood of additional mortgage-related litigation that the major banks face," said Guggenheim Partners analyst Jaret Seiberg in a note on Thursday. The deal, so far, only applies to the five banks who signed it. It does not apply to government-owned mortgage giants Fannie Mae and Freddie Mac, which hold more than half of all the mortgages in the U.S. The proposed settlement distributed last month to state officials included rough estimates on the benefits each state's homeowners might receive, but did not include guaranteed numbers. California received a guarantee its struggling homeowners would receive around $8 billion in relief, two people familiar with the negotiations said. The state itself would receive around $430 million for foreclosure prevention and other housing efforts. Money breakdown Under the terms of the agreement, the servicers are required to collectively dedicate $20 billion toward various forms of financial relief to borrowers. At least $10 billion will go toward reducing the principal on loans for borrowers who, as of the date of the settlement, are either delinquent or at imminent risk of default and owe more on their mortgages than their homes are worth. At least $3 billion will go toward refinancing loans for borrowers who are current on their mortgages but who owe more on their mortgage than their homes are worth. Borrowers who meet basic criteria will be eligible for the refinancing, which will reduce interest rates for borrowers who are currently paying much higher rates or whose adjustable rate mortgages are due to soon rise to much higher rates. Up to $7 billion will go towards other forms of relief, including forbearance of principal for unemployed borrowers, anti-blight programs, short sales and transitional assistance, benefits for service members who are forced to sell their home at a loss as a result of a Permanent Change in Station order, and other programs. Because servicers will receive only partial credit for every dollar spent on some of the required activities, the settlement will provide direct benefits to borrowers in excess of $20 billion. The Office of the Comptroller of the Currency also said on Thursday that Bank of America, Citigroup, JPMorgan and Wells Fargo have agreed to pay a penalty of $394 million as part of a settlement they reached in April 2011 with regulators over foreclosure abuses. The banks can meet the terms of the penalty through payments they make as part of the larger settlement with state attorneys general and the Justice Department, the OCC said. What does it mean to me? If you are underwater on your home or struggling to pay your mortgage, you are probably wondering whether you can expect relief under a $25 billion settlement reached by state and federal officials with the nation's biggest banks. The short answer is, you probably won't know right away. According to details laid out on a new "National Mortgage Settlement" website, the payments and other relief will be made over a three-year period and "borrowers will not immediately know" whether they are eligible. There are three main categories of people who will be aided under the settlement, according to the site:
  • Homeowners who need loan modifications to stay in their homes. Loan servicers have agreed to write off some principal in these cases, which would help homeowners refinance at lower monthly payments.
  • Borrowers who are current on payments but underwater, meaning they owe more than their home is worth. Servicers will help some of these owners refinance at current rates, which are at or near record lows.
  • Borrowers who have lost their homes to foreclosure. Some of these former owners will be eligible for payments. $1.5 billion will be distributed to 750,000 borrowers, which works out to $2,000 per person.
Within the next 30-60 days, an administrator will be chosen to oversee the settlement. Eligible homeowners will be identified over the next six to nine months, and will be notified by mail. The settlement largely affects borrowers whose loans are serviced by five big banks: Bank of America, Citi, JPMorgan Chase, Wells Fargo, and Ally/GMAC. Loans owned by government-owned mortgage giants Fannie Mae and Freddie Mac are not affected. Borrowers from Oklahoma also will not be eligible because officials from that state did not join the settlement. For more information. including telephone numbers of the loan servicers, check out the settlement website. The site also includes links to check whether your home loan is owned by Fannie or Freddie. Choose From More Than 400 House Designs and House Plans We offer house designs in a wide range of styles and sizes. Some of our more popular house designs include European-inspired Georgian and Palladian homes, English Manor house plans, Tuscan-style Italian villas, French chateaux, and Colonial house plans. Our Tuscan-style villas range from 1800 sf to 13,600 sf. Our Newport Classics house designs are gentrified New England-style cottages that range from 1500 to 5000 square feet. Our starter castles, mansions and estate homes are designed in the grand tradition of some of the most impressive homes in the world. Please feel free to search our house designs or browse our photo gallery to get a sense of the many styles and types of house designs we offer.

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  • Joanne Loftus
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