Is the mortgage settlement enough?

Is the mortgage settlement enough?

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The Justice Department and the Obama Administration have been busy trying to provide relief to home owners who suffered under the mortgage crisis and punishing those that contributed.

But will it be enough?

In response to critics on the left that no one in the banking and financial industry who contributed to the housing crisis has been punished, the Obama administration has ordered DOJ to launch an investigation. That “investigation” has started with a “working group.” [sigh].

At the end of January, the Department of Justice announced that it will formulate a taskforce headed by Attorney General Eric Holder, including all 50 state attorneys general and other federal entities.  The group will hold those “responsible for misconduct contributing to the financial crisis through the pooling and sale of residential mortgage-backed securities,” a DOJ statement read about the formation of a “Residential Mortgage-Backed Securities Working Group.”

If you know how slow government investigations go, we’re probably not seeing anyone get shackled and hauled off to white collar jail anytime soon. Don’t hold your breath folks.  The Treasury Department is also involved and is currently investigating a report that Freddie Mac gambled against homeowners’ ability to refinance their loans while making it difficult for them to actually readjust existing homes.

In the meantime, it has been breaking its neck trying to find help for existing home owners and even for those who were already booted out of their homes.  More than 10 million Americans owe more on their home than it is worth.

Last week, DOJ announced that it had reached a nearly $30 billion settlement with five of the largest mortgage lenders. Under the agreement with Bank of America Corporation, JPMorgan Chase & Co., Wells Fargo & Company, Citigroup Inc. and Ally Financial Inc. (formerly GMAC) and 49 states. (Oklahoma worked out its own agreement) The terms of the settlement are:

$10 billion will go to help reduce the principal owed on loans for borrowers who, as of the date of the settlement, are either delinquent, at risk of falling behind or are under water (they owe more on their mortgage than their homes are worth)

Another $3billion will go towards refinancing underwater home mortgages

An additional $7 billion will go towards programs that will let unemployed homeowners forbear on their principals owned, anti-blight programs to deal with unoccupied foreclosed properties that are bringing down home values of  neighboring homeowners, short sales and other transitional assistance to help pay for moving costs of those who unfortunately will have to leave their home.

The banks will have 3 years to comply with the rule

Individual borrowers can still bring their own lawsuits

State Attorney Generals cal also bring another suit if they wish

The United States Government can try to get back losses and penalties from banks that did not meet their own underwriting standards on government-insured or guaranteed loans.

The agreement does not prevent any action by individual borrowers who wish to bring their own lawsuits.

State attorneys general also can also sue.

Those who lost their home, an estimated 750,000 people, will be eligible to receive $2000 retribution payment for being forced out of their home without given enough opportunity to stay in it.

A week prior, the president announced a deal that would permit those who are current in their Fannie Mae and Freddie Mac homes to refinance.  In January, Treasury offered incentives to Freddie Mac and other lenders to forgive portions of homeowner debt which is a first time for Freddie and Fannie loans.  About 11 million eligible Freddie and Fannie backed loans and approximately 3.5 million privately own loans were set for being refinanced.

However, there is always a catch.  They had to be current in their homes, have a credit score of above 580 and be paying a high enough interest rate to make refinance a worthwhile option. Oops: that might have canceled out a tremendous chunk of folks – especially people of color – out there who have fallen behind in their payments after losing a job.

At least there is some effort, huh? With all the various programs being thrown at homeowners, they’re bound to qualify for one of these initiatives.

Now whether that Justice investigation lands anyone in jail before the 2012 elections is yet to be seen.  It’s doubtful.

3 COMMENTS

  1. I’ve apply for 5 times for my interest to be lowered, refin, wrote the banks and filled all the forms !! Nothing and know as a single mother I’m facing forcloser!! Please share any more that may HELP!
    Thank you

    Serenity- TraciTiera

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