Thursday, February 16, 2012

National Mortgage Settlement May Help Some Homeowners Avoid Foreclosure

A national mortgage settlement between federal and state governments and several major banks across the United States may provide relief for homeowners who are currently facing the possibility of foreclosure or bankruptcy.  49 states – all but Oklahoma – agreed to the deal with Bank of America, Citigroup, J.P. Morgan Chase, Wells Fargo, and Ally Financial.  The $25 billion settlement came about as a result of a suit filed by United States Attorney General Eric Holder and state Attorneys General across the nation.  The suit alleged that the defendant banks engaged in dishonest and neglectful practices by failing to properly authenticate mortgage forms before granting loans to customers. 

Sadly, in spite of the seemingly large size of the settlement, our Oak Park foreclosuredefense lawyers know that many of the people in our local area who are struggling with mortgage payments will not be helped very much, if at all, by this settlement.  One reason for this is that nearly half of the settlement money - $12 billion – is already earmarked for the state of California.  In addition, loans from certain institutions such as Fannie Mae and Freddie Mac are not covered by the settlement, which precludes many homeowners from sharing in the settlement.  Even those homeowners who are covered by the settlement may still see little relief since it will take months or maybe even years to properly distribute the funds.  Because of the large number of people who are in mortgages they cannot afford, the assistance may not come fast enough to help them avoid foreclosure and get back on track with their monthly payments. 

A new website has been set up at, where homeowners can go to find out if they are eligible for any kind of mortgage relief or payment.  A relatively small portion of the funds have been earmarked for those who have already been on the losing side of a foreclosure proceeding, but the vast majority will be used for people who are currently struggling to make payments but have not yet lost their houses.  Hopefully, the funds will be distributed in time to help people get caught up on their payments and find a way to keep their homes. 

Unfortunately, our Oak Park and River Forest foreclosure lawyers know that despite this settlement, the problems faced by our community are far from being over.  In fact, according to an article published this week by the Rockford Register Star, Winnebago County Recorder Nancy McPherson has uncovered evidence that shows that the very practices that got the mortgage industry in trouble in the first place are still going on at various Illinois banks.  That means that even as assistance comes for some harmed by poor mortgage practices, others continue to walk down a path that may ultimately lead them into foreclosure and even bankruptcy.  Settlements like this one can only go so far towards helping people keep their homes.  What is really needed is a fundamental change in the industry, not just a temporary fix that comes after the fact. 

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