Will The $18 Billion Mortgage Settlement Really Help California Homeowners?

California Awarded 18 Billion Dollars To Help Struggling Homeowners

More details have been released regarding the nationwide lawsuit and mass settlement against Wells Fargo, Bank of American, JP Morgan Chase, Citigroup, and Ally Financial, which are the largest home loan servicing companies in the U.S.

How The California Mortgage Settlement Money Will Be Divided

According to the California State Attorney General, Kamala D. Harris, California was awarded a total of $18 Billion to assist various groups of homeowners. The settlement money will be divided as follows:

• $12 Billion + will be used for California short sales and to reduce the principal balance owed by borrowers whose homes are worth less than what they currently owe.
• $3.5 Billion will be applied to loans that California borrowers are obligated to pay, after a foreclosure.
• $1.1 Billion will be used to assist unemployed California homeowners with things such as transitional costs.
• $849 Million will be used to refinance California home loans owned by borrowers that are still current on their mortgage, yet owe more than their homes are worth and cannot refinance through traditional means.
• $430 million will be paid to the state attorney general's office, to cover costs and fees.
• $279 million will be paid as restitution, to California homeowners that lost their property to foreclosure between 2008 and 2011.

California Homeowners Can Still Sue Their Lender

California homeowners may still seek additional relief and retain the right to take legal action against their lender(s). However, this settlement does not relieve a homeowner from their financial responsibility, and it does not stop any foreclosure proceedings.

The Government Is Getting Wise To Lenders Games

So, how will this affect California homeowners, and will it make difference? As we've seen over the past several years, there have been numerous attempts by the government, to twist the arm of the lenders, in an effort to make them share some of their record breaking profits with homeowners that have been affected by the wide spread devastation, all to no avail. Is this time different, and if so, how?

Well, it looks as though government entities are getting wise to the reindeer games, and have taken some precautions to ensure that this is not just another wild goose chase for borrowers. Apparently, part of California's settlement agreement states that if lenders do not reduce principal balances on California home loans,by at least $12 billion, they will pay fines to the state of up to $800 million.

Is An $800 Million Slap On The Wrist Enough?

Is that enough? I say that it's doubtful. While $800 million may seem unfathomable to me and you, I don't believe that it's enough of a slap on the wrist for mega giant lenders such as these. Without knowing what the additional stipulations are, I'll refrain from going on too much of a tirade, but that, in and of itself, is not a sufficient incentive. I'm just sayin...

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