Have you been paying close attention to federal efforts to deal with the foreclosure crisis? A recent article in the Chicago Tribune suggests that there’s good news: U.S. banks appear to be on track with mortgage relief.
Earlier this week, we referred to the 2012 settlement intended to reduce foreclosure problems and mortgage abuses. In fact, recent Illinois Supreme Court rules reflect upon some of the criteria in this federal-state settlement in which the top five U.S. banks agreed to fund consumer relief and resolve allegations related to bank misconduct to the tune of nearly $20 billion. While the state Supreme Court rules are likely to produce quicker results in our state, it looks like federal actions to address foreclosures are having a positive impact. What does this mean in practical terms for homeowners in Illinois?
Terms of the Settlement
Last February, Bank of America, JPMorgan Chase, Wells Fargo, Citigroup, and Ally Financial agreed to pay almost $20 billion, most of which “was earmarked to help distressed borrowers stay in their homes.”
According to Reuters, settlement agreement funds generated through short sales can only count partially in the banks’ fulfillment of this financial agreement. Short sales are home sales in which the bank avoids foreclosing on a property by agreeing to take a lesser amount for the property than what the borrower owes on his or her mortgage. For example, if a borrower owes $500,000 on her mortgage, in a short sale, the bank might agree to take $400,000 in order to avoid foreclosing on that home. Typically, homeowners prefer short sales to foreclosures, and the short sales usually end up costing banks less in the long run, too.
But, in working to speed foreclosure relief, one of the important long-term goals of the settlement includes limiting the number of short sales. The point of relief efforts at the federal and state levels is ultimately to keep borrowers in their homes.
Given that short sale funds can only count for a small part of the banks’ financial obligation to borrowers, the settlement agreement was intended to increase principal reductions, meaning financial assistance for borrowers that would help them to keep their homes. Principal reductions can include loan modification or refinancing help.
What Have the Banks Done So Far?
North Carolina Banking Commissioner Joe Smith is the watchdog who oversees the 2012 agreement. He recently indicated that he is “encouraged by the consumer relief piece of the settlement,” and that he’s “satisfied” with the infrastructure for the banks to work within, although there’s always more work to do.
In terms of successes, several of the banks indicated that they were “on track” to meet their financial obligations by the end of 2013, with some as early as this spring. According to records in Reuters and the Chicago Tribune, more than 320,000 borrowers have received assistance to stay in their homes. This relief came in the form of loan modifications, refinancing help, and some loan forgiveness. Smith reported that the banks have given $45.8 billion in relief to homeowners thus far.
However, a large percentage of that money “came in the form of short sales.” While Reuters praised the banks’ efforts thus far, it reminded its readers that the banks must do more to fulfill their agreement. Smith emphasized that the banks need to “improve their compliance with the servicing standards laid out in the settlement,” since he’s continuing to see complaints about how the banks address problems with loans.
Are you an Illinois borrower who may benefit from some of this relief? If you’re currently concerned about paying your mortgage and keeping your home, an experienced foreclosure defense attorney can explain how state and local relief programs can help you.
See Related Blog Posts:
Loan Modification Plans May Be Falling Short
Foreclosures in Illinois Near Top of Nation in 2012