Low Settlement Claim Numbers Could Mean Flat Penalty For Mortgage Servicers

U.S. regulators are considering a “flat penalty” levy against fourteen of the largest mortgage services since settlement claims are lower than expected. Under the foreclosure settlement reached between mortgage services and state attorney generals, mortgage servicers are obligated to compensate homeowners who lost their homes to illegal foreclosures. But only an estimated 356,000 people have filed a claim for compensation according to some advocacy groups.  That’s a small percentage of the estimated 4.4 million homeowners who are eligible for the settlement.  But part of the problem may be that many homeowners don’t realize that even if they did not lose their home to foreclosure they may have a right to assistance under this settlement agreement. According to the National Mortgage Settlement website, the settlement provides assistance for:

• Homeowners needing loan modifications now, including first and second lien principal reduction.  The servicers are required to provide up to $17 billion in principal reduction loan modifications and other forms of foreclosure prevention nationwide. Eligible borrowers should be contacted by mortgage servicers.  This modification process will continue for approximately 3 years. State attorneys general anticipate the settlement’s requirement for principal reduction will show other lenders that principal reduction is an effective tool in combating foreclosure and that it will not lead to widespread defaults by borrowers who really can afford to pay.
• Borrowers who are current, but underwater.  Eligible borrowers can take advantage of today’s historically low interest rates by refinancing their mortgage despite negative equity.  Servicers must provide up to $3 billion in refinancing relief nationwide.
• Borrowers who lost their homes to foreclosure between Jan. 1, 2008 and Dec. 31, 2011. Cash payments will be distributed to borrowers who receive and return a claim form. There is no requirement to prove financial harm and borrowers are not required to release private claims against the servicers nor will they have to relinquish the right to participate in the independent review process being conducted by federal banking regulators.  $1.5 billion is expected to be distributed nationwide to some 750,000 borrowers.

Borrowers have until January 18, 2013 to file a claim.  If you suspect you’re eligible, visit the National Mortgage Settlement website and file your claim.  You can also call the banks directly:

• Ally/GMAC: 800-766-4622
• Bank of America: 877-488-7814 (Available M-F  7am – 9pm CST and Saturdays  8am CST – 5pm CST)
• Citi: 866-272-4749
• JPMorgan Chase: 866-372-6901
• Wells Fargo: 800-288-3212 (Available M-F 7 a.m. to 7 p.m. CST)

You can also contact National Mortgage Settlement office at 866-430-8358 Monday through Friday 7:00 a.m. – 7:00 p.m. CST to have a claim form mailed.