Thursday, March 1, 2012

Help for Victims of Housing Crisis?

The Obama administration has recently announced a deal to help the 1.75 million victims of the housing crisis. This is the largest ever joint state-federal settlement and is intended to correct some of the abuses in the mortgage lending industry that have hurt many U.S. homeowners and may be the primary cause of the current economic crisis. The $25 billion agreement with the five largest mortgage services -- Ally Financial (formerly GMAC), Bank of America (BofA), Citigroup, JP Morgan Chase and Wells Fargo -- should bring $1.5 billion in cash payments to 750,000 former mortgagees who have lost their homes to foreclosure and up to $20 billion in assistance to help current homeowners remain in their properties.

Here is how the settlement will affect three groups, reports Mary Ellen Podmolik for The Chicago Tribune.

·        - Consumers whose mortgages were serviced by one of the above-mentioned banks, with loans held by Fannie Mae or Freddie Mac, and who lost their homes to foreclosure between 1/1/08 and 12/31/11 are eligible to receive $1,500-$2,000 each. Those consumers should contact their former servicer with their current address. Those who lost their homes following a short sale or deed-in-lieu agreement with their mortgage servicer are not eligible.

·         -Delinquent borrowers who are at least 30 days behind on their mortgage or who can demonstrate that they are at imminent risk for default and have a mortgage held by one of the five banks in question or by a private investor may be able to get some relief on first mortgages (although they will still be ‘underwater’). Write-downs on second mortgages are also possible. The borrower’s mortgage must be less than $417,000; homeowners whose mortgages are not 20% or more underwater will probably not be considered. Homeowners should contact their mortgage servicer to find out who actually holds the mortgage.

·        - Current borrowers whose mortgages are held by the five banks, who are underwater, are paying more than 5.25% interest and are unable to refinance their loans, may be able to refinance their loan to a lower rate, determined on a case-by-case basis. Borrowers who have been delinquent during the last twelve months, have filed bankruptcy in the past 24 months, have had a mortgage modification in the last 24 months or hold a loan by Fannie Mae or Freddie Mac are not eligible. Eligible borrowers should receive notification from their mortgage servicers.

For more information, consumers should go to and for more information on how to file personal Chapter 7 or Chapter 13 bankruptcy, log onto

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