California has joined the national settlement that will provide mortgage relief to struggling homeowners.
Report from NPR's Two-Way blog:
According to (NPR reporter) Yuki Noguchi, California was the last state to sign on to the deal. Now, she tells our Newscast Desk, "in exchange for a kind of immunity from many types of mortgage-related lawsuits, the banks will have to pay about $5 billion in cash" and write down, refinance or reduce the principal on more than $20 billion worth of home loans. "Some estimates say as many as 1 million homeowners who owe more than their home is worth, could be eligible for some sort of payment reduction."
As Yuki has also previously explained, the bulk of the money:
"Would go toward writing down principal payments for homeowners who were not foreclosed upon, but who are struggling now. ... The way it would work is that the banks would have targets they have to meet, in terms of what kinds of loans they would have to modify. But the banks would still have a lot of discretion in who gets what.
"And there's another $5 billion in cash, part of which would go to the states to help fund homeowner assistance programs. Some of the rest would go to homeowners who may have been wrongfully foreclosed upon. For them, it's up to $2,000 each, which is not much if you lost your home."
Speaking to KQED's Cy Musiker, George Goehl of the National People's Action, a collection of community housing groups, also criticized the agreement saying $25 billion for homeowners would be a "paltry down payment," considering that roughly 11 million homes are underwater by a combined $750 billion.
FAQ on the settlement from the Attorney General's site. Some important points:
What banks must own your mortgage for you to qualify for help?
Bank of America, JPMorgan Chase, Citibank, Wells Fargo, and Ally Financial. From the FAQ: "Several of these banks are also known by other trade names, including Countrywide (a trade name for Bank of America); Washington Mutual and EMC Mortgage (Chase); CitiMortgage (Citibank); Wachovia (Wells Fargo); and GMAC (Ally Financial).
What conditions must you meet to qualify for help?
To qualify for a refinance under the settlement, your loan must be serviced and owned by one of the settling banks. You must also be current on your mortgage and have no delinquencies within the past 12 months. You must also be underwater and your interest rate must be at least 5.25 percent. Unfortunately, the following types of loans are excluded from the refinance program: FHA Loans, VA Loans, and loans on manufactured homes. In addition, if you have been in bankruptcy in the last 24 months or have been in foreclosure in the last 24 months, you are ineligible.
What types of help are available if you qualify?
The settlement provides two main types of loan modifications for qualifying homeowners: principal write-downs and refinancing in order to make your monthly mortgage payment more affordable. In the case of a principal write-down, the bank reduces the unpaid principal balance of your loan so that your monthly payments are reduced to an affordable level. In the case of a refinance, the length of the loan may change and/or the interest rate will be reduced so that your monthly payments are reduced to an affordable level. If a principal write-down or refinancing arrangement will not be enough to make your mortgage affordable, there are other options available under the settlement, including help with short sales and relocation assistance. You should contact your servicer with questions about which relief you are eligible for and what options best fit your goals."
What if you already lost your home?
If your loan was owned or serviced by any of the settling banks, and your home was foreclosed upon between January 1, 2008 and December 31, 2011, you may be eligible to receive a cash payment as part of the settlement.
Also, here is a timeline of when aid will become available from the National Mortgage Settlement site:
- Over the next 30 to 60 days, settlement negotiators will be selecting an administrator to handle the logistics of the settlement and monitor compliance.
- Over the next six to nine months, the settlement administrator, attorneys general and the mortgage servicers will work to identify homeowners eligible for the immediate cash payments, principal reductions and refinancing. Those eligible will receive letters.
- This settlement will be executed over the next three years.