$3.6 Billion in Relief So Far for Florida Homeowners

December 12, 2012

According to the Miami Herald, five of the nation's biggest banks have provided $3.6 billion in mortgage relief to burdened Florida homeowners as a part of the National Mortgage Settlement Agreement. Ally Financial, Bank of America, Citicorp, JP Morgan Chase and Wells Fargo collectively agreed to the settlement earlier this year with the federal government and attorney generals in 49 states.

These financial institutions were major players in the robo-signing of foreclosure documents. This is when banks process foreclosures without verifying documents. The banks allegedly engaged in other abuses during the financial crisis -- specifically when home values declined and homeowners faced losing their homes.

According to the Washington Post, the deal between the banks and the government, which was finalized in February 2012, represents the largest industry settlement with a governmental body since an agreement with tobacco companies in 1998.

The Miami Herald reports that in the United States, $84,385 in relief was provided to each of 309,000 borrowers, adding up to $26.1 billion nationwide between March 1 and Sept. 30, 2012. Through this settlement, thousands of Florida homeowners have benefited from short sales, loan forgiveness, loan modifications and other actions. Florida homeowners who have taken advantage of the settlement have seen an average relief of $73,663 per household.

Recovery

In Florida, most of the recovery has come in the form of short sales. In a short sale, the lender agrees to accept less than what the seller owes on the mortgage. The Miami Herald explains that in the U.S., $13.1 billion of the $26.1 billion in relief was derived from this process. The Herald-Tribune adds that banks forgave $2.2 billion in debt through short sales to 19,673 homeowners, which resulted in an average of $111,853 per sale.

Furthermore, the Herald-Tribune notes that another $386.7 million has come from first-loan modifications and $362.6 million from a discharge of second liens (for example, home-equity loans). Additionally, $1.4 billion was provided by refinancing 37,396 home loans with an average principal balance of $210,398. Overall, borrowers will save an average of $409 in interest payments each month.

Each institution is responsible for providing a specific amount of aid under the terms of the settlement; however, particular kinds of relief receive a larger credit. For example, banks receive a higher credit for providing aid such as principal reductions and mortgage modifications during the first year of the settlement.

Reactions to the settlement

With these incentives, banks are eager to complete their distribution of relief before the three-year deadline that the settlement mandates. Nevertheless, consumer advocates argue that relief to those most in need has been trivial.

Critics also believe that the punishment is too little for the banks involved. On the other hand, state and federal officials who negotiated the deal assert that the settlement was never intended to be a cure-all solution. Specifically, it will provide quick and much-needed relief to many homeowners in the U.S.

New policies that protect homeowners

The Washington Post reports that more than 300 updated service standards went into effect this fall, detailing how banks should deal with mortgages and interact with troubled homeowners. The mandatory standards are a part of the overall settlement and must be implemented by the financial institutions. Government officials plan to use the standards to restore the broken mortgage-servicing system.

Such changes include prohibiting the practice of robo-signing (poor legal paperwork to speed foreclosure cases). In addition, banks are not allowed to simultaneously foreclose on homeowners and work with them on a loan modification if the borrower has provided a complete modification application before they are 120 days past due, a process known as "dual tracking". Furthermore, the settlement requires the lender to explore all possible mitigation options before resorting to foreclosure.

If you are facing serious financial instability that could affect your Florida home, you should contact an experienced real estate attorney. You are not alone in this financial crisis. A lawyer can help you assess your situation.

Article provided by Mascia Law Firm, P.L.
Visit us at www.mascialawfirm.com