On February 9, 2012, the federal government announced a $25 billion settlement with the nation’s largest banks to provide relief for property owners struggling to pay their mortgages. The settlement arises in connection with claims of foreclosure abuses by the banks which led to thousands of irregularities and claims of false filings and “robo-signings”, and more mortgage providers are expected to join. The settlement is designed to provide assistance for distressed properties and will help DC loan modifications and DC short sales:
1) Loan Modifications: For DC property owners needing loan modifications now, the lenders and their servicers are required to provide $17 billion to principal reductions and other forms of loan modification relief on first and second mortgages to eligible DC property owners.
2) Underwater Loans: Eligible borrowers who are current, but whose homes are “underwater” (worth less than the mortgage owed), will be able to refinance at today’s low interest rates even though their loan amounts exceed the market value of their homes, or sell their home short. DC short sales will benefit from the increased incentives offered lenders to work out alternatives to foreclosure.
3) Foreclosed Homes: Borrowers who lost their homes to foreclosure, who were foreclosed on between January 1, 2008 and December 31, 2011 will be eligible to receive payments of up to approximately $2,000 without any necessity to prove financial harm and without having to release private claims against the lenders or servicers who conducted the foreclosures. Implementation and monitoring of the settlement will be set up in the next 60 days and the program completed within 3 years.