New Foreclosure Settlement to Distribute $8.5 Billion to Millions of Eligible Borrowers
For the second time in two years, U.S. banks have agreed to pay a major settlement to homeowners who were improperly foreclosed upon. As to whether it will be more effective than the first agreement, only time will tell.
USA Today reports that 10 of the nation's largest banks claim they will shell out $8.5 billion - some in direct payments and some in the form of loan modifications and other adjustments - to borrowers who were victims of servicing errors.
Federal regulators put foreclosure processing on hold in 2011 to investigate accusations that banks were improperly handling paperwork and ignoring important regulations in order to push a glut of foreclosures through the system as quickly as possible.
As a result, millions of people who may otherwise have been able to save their homes ended up losing the properties to lenders.
It's estimated that 3.8 million borrowers who lost a home between 2009 and 2010 to one of the 10 banks listed in the settlement could qualify for a piece of the pie.
The banks included are Wells Fargo, Citigroup, Bank of America, JPMorgan Chase, U.S. Bank, MetLife Bank, Aurora, PNC, Sovereign, and Sun Trust. Four more banks still negotiating with lawmakers could be added later on.
But as the past has shown, promising to make good with consumers and actually doing it are two different thing entirely.
A much larger $26 billion settlement deal was made with major mortgage lenders in spring of 2012. Ultimately, however, that agreement only ended up helping less than 1 million of the 11 million homeowners with an underwater mortgage, not to mention the millions more who had already lost their homes to foreclosure.
Some consumer advocates have been quick to point out that the new, smaller settlement will likely do even less to help those who need it most.
To even be considered, a borrower's mortgage must have been held by one of the 10 banks. Even if you qualify for a loan modification, you may not see a significant change in your payments. And if you receive a direct payment, it's unlikely to be enough to make staying in your home more affordable.
For most homeowners, the settlement is merely a formality acknowledging that banks were in the wrong. But when it comes to actually stopping foreclosure, it's too little too late.
But just because your bank won't bail you out doesn't mean you can't change your fate. Chapter 13 bankruptcy remains the most powerful tool to stop foreclosure and reorganize debt so it's possible to regain control of your finances.
If you're delinquent on your mortgage and facing foreclosure, you don't have time to wait for a loan modification that may never come - or may not do enough to change your financial situation when it does.
Filing for bankruptcy is a guaranteed method to lower debt once and for all. When you're free of overwhelming debt, your bills will become more manageable, you can bid goodbye to degrading harassment by debt collectors, and you can work on improving your credit and finances.
Bankruptcy is more than a chance to save your home - it's a chance at saving your future.
More Blog Entries:
Are Banks Bypassing Poorer Homeowners When Distributing Mortgage Relief?: November 19, 2012
Ten Banks Settle Foreclosure Charges for $8.5 Billion, by Kevin McCoy, USA Today
Rage Grows Over Mortgage Deal, by Les Christie, CNN Money