State, federal officials reach $25 billion settlement with mortgage servicers

February 23rd, 2012

Not sure whether you can be helped by the government's settlement with five banks? You're not alone. In fact, it could take quite some time to sort out exactly who can be helped by the settlement. In the meantime, here are a few of the details about it.

Historical settlement

The historic $25 billion settlement is between the federal government, 49 state attorneys general and the country's five largest mortgage servicers: Ally/GMAC, Bank of America, Citi, JPMorgan Chase and Wells Fargo. The deal should bring relief to distressed borrowers through the states and the federal government. Other banks are expected to make similar arrangements. Oklahoma is the only state that did not participate in the settlement.

The deal was hammered out following an investigation that determined that loan servicers routinely signed documents related to foreclosures without determining whether or not the information contained within them was correct. There was a huge public outcry over the "robosigning" controversy, and many homeowners claimed that they should never have lost their homes.

Relief for some borrowers

The settlement is to provide relief to borrowers with mortgages serviced by the banks or who were foreclosed upon by one of them between 2008 and 2011. Types of assistance may include:

  • Reducing mortgage principal for borrowers who are underwater or at risk of defaulting
  • Refinancing for homeowners who are current on mortgage payments
  • Cash payments of about $1,500 to $2,000 for people who lost their home through foreclosure

Using mortgage calculators

Of course, the settlement is only going to impact some homeowners. In the meantime, if you don't believe the settlement can help you, there may be other steps you can take to hold on to you home. A refinance calclulator can help determine whether getting a new home loan could be a smart move.

The free mortgage calculators available here should be used as a guide for research purposes. If you really want to know if you qualify for refinancing, talk with several mortgage lenders and use a compare loans calculator to choose the best deal.

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