By: Lance T. Denha, Esq.
Earlier this month a $25 billion legal settlement between five banks had been reached which requires these banks to reduce loans for households at risk of foreclosure. The lenders also intend to send checks of $2,000 to about 750,000 Americans stemming from improper foreclosures, mortgage modification misconduct and other abuses against US homeowners by mortgage servicers. All in all, forty-nine states have agreed to join in this settlement.
Michigan residents will be receiving approximately half-billion dollars, including a $101 million fund provided directly to the State of Michigan which shall include: foreclosure counseling for homeowners, foreclosure rescue scam restitution, payments to borrowers who suffered foreclosure, veterans assistance and aid for children made homeless by foreclosure.
Many companies processed foreclosures without verifying documents. Some employees signed papers they hadn’t read or used fake signatures to speed foreclosures — an action known as robo-signing. Robo-signing is a term used by consumer advocates to describe the robotic process of the mass production of false and forged execution of mortgage assignments, satisfactions, affidavits and other legal documents related to mortgage foreclosures.
This settlement allows authorities to pursue criminal charges as well as homeowners initiating or defending wrongful foreclosure actions. The banks involved have up to three years to meet the provisions of this settlement although there are incentives for banks to assist homeowners during the first 12 months.
This settlement is a step in the right direction. The wonderful thing about this settlement is that the deal requires banks to make foreclosure their last resort. While a $25 billion settlement is a lot of money, consumer advocates argue that this helps far too few people. The deal reduces loans for only a fraction of those Americans who owe more than their house is worth. Of course, it may not be enough to stop foreclosure for everyone who needs assistance as there are 4 million homeowners who have lost their home and another 11 million people who owe more than their properties are worth. Homeowners should continue to keep all loss mitigation options in mind including short sales as short sales have a limited negative impact on their credit rating.