Friday, February 10, 2012

Mortgage Settlement Announced - What it Means for Minnesota

On February 9th, 2012, the Minnesota Attorney General’s office and the Department of Commerce announced that the State of Minnesota would be participating in the Federal Foreclosure settlement with five major lenders/servicers.  These five servicers have agreed to a $26 Billion dollar settlement, through which Minnesota borrowers may be eligible for up to $280 million.

The five lenders are: Ally/GMAC, Bank of America, Citi, JP Morgan Chase and Wells Fargo.  (Nine other servicers may sign on to the settlement later, we’ll update that information as it becomes available.)    It is important to note that loans owned or backed by Fannie Mae and Freddie Mac are not part of the settlement.  However, there are other programs and assistance available to some of these borrowers.  Click here for more information.

Additional information for homeowners interested in learning more about the settlement is available here:  

REMEMBER:  DO NOT PAY FOR HELP.  No ‘agent’, ‘specialist’ or ANYONE should be charging you to ‘get access’ to the settlement.

Direct Payments to Borrowers.  Minnesota borrowers may qualify for financial compensation:

  • Certain borrowers who lost their home to Sheriff’s Sale between the beginning of 2008 and the end of 2011, may be eligible for financial compensation of approximately $2,000* if they lost their home due to financial hardship AND 
  • They were in the process of seeking a loan modification and the bank proceeded with the foreclosure anyway OR
  • There were documented errors committed by the lender in the foreclosure process.

*The exact amount paid to homeowners will depend on the number of eligible borrowers who file a claim.

Refinancing Benefits. This part of the settlement allows underwater borrowers of mortgages owned by the five banks (as long as they are not backed by Fannie/Freddie) to refinance to a lower interest rate if they are current on their mortgage and have not had any late payments in the last 12 months.  The loan must have been originated prior to January 1, 2009, and have an interest rate of 5.25 percent or more. 

Principal Reductions and Other Relief. This part of the settlement will allow certain borrowers of loans owned, or in some cases serviced, by the five banks to qualify for:
  • a principal reduction of their underwater mortgage and either 30 days late on the mortgage or who face ‘imminent default’;
  • a forbearance  (set period of time with no mortgage payments) for unemployed borrowers, 
  • short-sale assistance, 
  • transitional housing assistance, 
  • and other relief (details to be determined)
Beyond the financial relief and compensation outlined in the settlement, the five banks have also agreed to make substantial changes to their mortgaging and servicing standards including:
  • Processing loan modification requests in less than 30 days
  • Stopping the foreclosure process for homeowners who have a loan modification application pending (as long as the application is processed more than 15 days before the Sheriffs sale)
  • Stopping the  foreclosure process completely for homeowners who are complying with a trial modification (either HAMP or the lenders’ in-house modification)
  • Lenders must process requests for short sales (permission to sell the home for less than the outstanding mortgage loan amount) in less than 30 days.
  • Lenders must assign a single point of contact to homeowners, or their foreclosure prevention counselor, who will be responsible for keeping the homeowner up to date with information about the loan, the modification process and any documentation needed.

  • Over the next 30 to 60 days, settlement negotiators will be selecting an administrator to handle the logistics of the settlement and monitor compliance. 
  • Over the next six to nine months, the settlement administrator, attorneys general and the mortgage servicers will work to identify homeowners eligible for the immediate cash payments, principal reductions and refinancing. Those eligible will receive letters directly from their lender/servicer.
  • This settlement will be executed over the next three years

The exact details of how homeowners access the settlement are still being worked out.  There are steps you can be taking to make sure that you keep up to date with the settlement:
  1. Contact a non-profit member of the Homeownership Advisors Network.  Foreclosure Counselors will know, as the details become available, the exact steps to take AS WELL AS know if you might qualify for any additional assistance or be able to access other programs to help prevent the foreclosure of your home.
  2. Contact your lender.  If your mortgage is with one of the five current participants in the settlement, visit the National Mortgage Settlement website for links to the banks’ websites and contact telephone numbers.  

Even if your bank is not participating in the settlement, or they are, but your loan is backed by one of the Government Sponsored Entities, it is important that you take steps right away if you are struggling with your mortgage.  Contact a foreclosure counselor TODAY to learn about the WIDE ARRAY of programs, helps and assistance that are available to Minnesota homeowners.  Counseling is FREE and non-biased.  The sooner you call, the more options you have available, and remember, NEVER PAY FOR HELP!

Thursday, February 2, 2012

Another New Refi Program? Get the Facts!

During the 2012 State of the Union Address, President Obama announced another expansion of the federal mortgage refinance program :
That's why I'm sending this Congress a plan that gives every responsible homeowner the chance to save about $3,000 a year on their mortgage, by refinancing at historically low interest rates. No more red tape. No more runaround from the banks. A small fee on the largest financial institutions will ensure that it won't add to the deficit, and will give banks that were rescued by taxpayers a chance to repay a deficit of trust. (From the State of the Union Address)

The current versions of the refinance program (HARP and HARP II) allow homeowners whose loans are owned by Fannie Mae, Freddie Mac or the Federal Housing Finance Agency, to refinance to current historically-low interest rates, EVEN IF the loan value exceeds the value of the home (allows "underwater" homeowners the opportunity to refinance).

On Wednesday, February 1st, the president released additional information about the proposed expansion of the refinance programs:

The proposed program (HARP 3?) would allow ALL homeowners who are current on their mortgage — even those who do not have loans backed by Fannie, Freddie or FHFA and even if they're  underwater on their mortgage — to also refinance their loans.

The proposal put forward by the administration includes some details about the who would qualify:

  • only owner-occupied, single-family homes are eligible.
  • Homeowners must be current on their mortgage and not had a lat payment for at least the past six months; 
  • Homeowners must have a minimum FICO credit score of 580; 
  • The loan amount cannot exceed the current federal conforming loan limit. 

For those who meet the criteria, the program would allow for a streamlined application process in which lenders would only need to confirm that a homeowner is employed and the home would not have to be appraised.

NOW... What does this REALLY mean for the average Minnesota Homeowner who might want to refinance?

  • Even though HARP II was announced in October of 2011, as of early February 2012, very few lenders and servicers have processes and procedures in place for homeowners to take advantage of the refinance program.  Any formal expansion to the program announced today would take MONTHS before a homeowner would likely be able to work out a refinance with their lender.  (See our blog post on the HARP 2.0 announcement in October, here)
  • Most Importantly, this expanded program will require CONGRESSIONAL APPROVAL. Given the fact that we are in a rather contentious election year... approval by congress is far from certain.

We'll continue to monitor this program, and if the program expansion does become a reality, we'll notify Minnesota Homeowners via this blog and our website, here.