States To Get $25 Billion From Mortgage Lenders

After it was discovered that many lenders may have engaged in deceptive or unethical acts in their mortgage lending and foreclosure practices, 49 states decided to sue. The result of those combined lawsuits is a $25 billion settlement.
The lenders involved in the suit are Ally/GMAC, Bank of America, Citi, JPMorgan Chase, and Wells Fargo. If you currently make or have made your payments to any of those banks at any time between 2008 and 2011 and your home was foreclosed on, you may be in line for part of that settlement. If you have/had another lender or live in Oklahoma, you are not eligible.

The Issue:  Robo-Signing of Foreclosure Documents

The settlement is mainly over the ”Robo-signing” of foreclosure documents that was uncovered a few years ago. You may be wondering what Robo-signing is, so here is a quick brush of the highlights. Robo-signing meant that lenders ”routinely signed foreclosure-related documents outside the presence of a notary public and without really knowing whether the facts they contained were correct.” The practice is the epitome of illegal and unethical. It also caused huge problems for borrowers by causing some people to lose their homes wrongfully. It also froze some real estate markets as courts struggled to process foreclosures in a timely fashion, thus taking longer for homes to be resold and lowering overall real estate values.
The settlement shakes out like this:

• At a minimum, lenders must commit to $17 billion in principal reduction and loan modification for homeowners who currently need help to avoid foreclosure.
• Lenders must spend up to $3 billion in refinancing for homeowners who owe more on their homes than the home is worth, commonly known as being ”underwater”. These owners must be current on their payments.
• Homeowners who lost their homes between Jan. 1, 2008, and Dec. 31, 2011, are eligible for part of  $1.5 billion in cash payments. There is a simple form to try to get part of this cash and individual borrowers can still pursue their personal legal cases against the lenders involved. A URL for more details is provided below.
• Of course, the states did not sue out of the kindness of their hearts. Each involved state is to get some cash to support the prevention of foreclosure and create consumer protection and education programs. On top of that, they will receive civil penalty cash to line the state coffers.

There are plenty of details about the settlement here:  http://www.nationalmortgagesettlement.com/faq.  This site was set up and dedicated to helping borrowers understand their rights in relating to this landmark agreement.