Banks and Attorneys General Reach Deal on Foreclosures

By: Ceara L. Riggs, Bankruptcy Attorney in St. Petersburg, Florida at The Reissman Law Group, P.A.
On February 9, 2012, State Attorneys General and five of the nation’s largest mortgage servicers reached a $25 billion settlement. Super. But what does this mean for those who have already been foreclosed upon, for those currently facing foreclosure, and for those who are maybe two or three payments behind and fear that foreclosure is just around the corner?
First, if you’re loan is a Freddie Mac or Fannie Mae loan, it means that not much changes for you. But that’s only about half of the nation’s borrowers. But it also means that law firms, like The Reissman Law Group, know how to protect your rights and have a proven track record of protecting your property and your rights in these typical foreclosures.
But if your loan is held by Ally/GMAC, Bank of America, Citi, JPMorgan Chase, or Wells Fargo, there’s a lot of good news coming your way that turns the tables on these banks!
For Borrowers seeking modification of their loan, servicers are now required (it’s bold and underlined for a reason) to collectively work off up to $17 billion in principal reduction and provide other forms of loan modification relief. So if you who owe more on your house than it’s worth, which I’d imagine is more than one person reading this, the courts have finally heard you! And these aren’t just empty promises, the courts have given the banks 2 years – just two years – to reach 75% of these targets.
So what? What if the banks don’t do provide this so-called “required” loan modification? For once, there’s an answer – servicers that miss settlement targets and deadlines will pay substantial cash penalties. It goes without saying that principal reduction is in everyone’s best interest!
But what if the bank doesn’t want to give me a principal reduction? The simple is, they don’t have to. But, if they don’t disperse at least 75% of the money set to go to borrowers, then they’re facing substantial cash penalties. Plus, it just make common business sense when you know the numbers. Think about it. Each foreclosure costs a bank, on average, about $60,000. Would you rather spend $60,000 on attorney’s fees, court costs, and other filing fees or would you rather reduce a person’s loan by $30,000 and pocket the other $30,000? Really? So, no, the servicers aren’t required to incur losses, but in a typical case, a modification tied to this settlement will result in more of a financial return for an investor than a foreclosure.
Plus, principal reduction isn’t the only option – The Reissman Law Group has been following the development of the court’s order  and we know that there are other options that the banks are willing to consider regardless of whether you are current on your mortgage payments, have fallen behind a year and a half, or even if you have already lost your home to foreclosure.
If you think this is just another bailout by the federal government that doesn’t carry much weight, think again! This isn’t just another law from Congress, this is a federal court order, meaning, if the banks don’t do what they’re required to do, in the time they’re required to do it, the State Attorney Generals and the US Department of Justice can seek redress. And if that wasn’t enough, independent monitors have been appointed to oversee the carrying out of the agreement and the lender’s compliance with the order, as well as given the authority to impose significant penalties if the banks violate the court order.
Sounds pretty good so far, doesn’t it? But, for Floridians, it gets even better because Attorney General Pam Bondi has taken the court’s order a step further – she has separately negotiated an agreement with three of the largest servicers to ensure that a guaranteed portion of the total $25 billion settlement goes directly to Florida borrowers. To be clear, Florida will be getting nearly 1/3 of the total settlement – a whopping $8.3 billion.
For more information, including the complete text of the settlement which each bank, visit www.nationalmortgagesettlement.com
If you believe you could benefit from the court’s order (and unless you win the $590 million lottery this week, just about everyone could benefit from this order), give us a call (727-322-1999) to set up a free consultation to discuss your options.