UNDERWATER MORTGAGE SETTLEMENT ANNOUNCED BY ATTORNEY GENERALS - WHAT IT MEANS

Reported yesterday in online editions of the press and hitting the newstands today is the settlement of $25,000,000,000 - that's $25 Billion - to the states and homeowners that were "abused" by lenders and that are underwater on their home values. The payments are to be made to the States within a few days of the Federal Judge approving the settlement and to affected homeowners and borrowers over the next three years.

Is it time to get excited?

If you are a State (I don't know of anyone personally being a State), a check will be cut to your treasury with the total in paid to the States of $5 billion. Florida is getting $350 million, for example. That leaves $20 billion for borrowers. If you are a former borrower (as in your home was lost to foreclosure) you may be entitled to up to $2,000. If you are still in trouble, the opportunity to refinancing, modification with principal reduction, or other adjustments is supposed to be enhanced. But don't expect any relief soon.

The Administrator will handle the logistics.

Over the next 60 or less days, a national administrator is to be appointed and the Administrator will monitor compliance and interpret what the settlement is to accomplish. The Administrator along with the state attorneys general and the loan servicers will identify homeowners eligible for the immediate cash payments, and for principal reductions and refinancings. If you are eligible, you will be notified by your lender. This is to be accomplished over the next 3 years, with a percentage of the estimated number of those eligible to be helped each year.

Florida borrowers are expected to receive about $309 million in refinancing of underwater loans.

Is this really a settlement?

The question is whether the banks really did anything they were not already going to do. The answer may be that the payment to the States is the only plum in the settlement. The other $20 billion in "relief" is really the same or smaller dollar amount that the lenders were expecting to lose on the problem loans anyway. Under the settlement there is a structured way to administer how those loses will be handled, with government oversight to relieve the lenders of themselves screwing up, since now they can blame the Administrator and the settlement interpretation they were only complying with.

WHO MAY BE ELIGIBLE?

The full settlement can be found at www.nationalforeclousresettlement.com where the summary of WHO MAY BE ELIGIBLE can be found and states:

Because of the complexity of the mortgage market and this agreement, which will be performed over a three-year period, borrowers will not immediately know if they are eligible for relief. Borrowers from states who did not sign the settlement will not be eligible for any of the relief directly to homeowners. Borrowers from Oklahoma will not be eligible for any of the relief directly to homeowners because Oklahoma elected not to join the settlement.

The settlement provides assistance for:

• Homeowners needing loan modifications now, including first and second lien principal reduction. The servicers are required to work off up to $17 billion in principal reduction and other forms of loan modification relief nationwide.

  State attorneys general anticipate the settlement’s requirement for principal reduction will show other lenders that principal reduction is one effective tool in combating foreclosure and that it will not lead to widespread defaults by borrowers who really can afford to pay.

• Borrowers who are current, but underwater. Borrowers will be able to refinance at today’s historically low interest rates. Servicers will have to provide up to $3 billion in refinancing relief nationwide.
• Borrowers who lost their homes to foreclosure with no requirement to prove financial harm and without having to release private claims against the servicers or the right to participate in the OCC review process. $1.5 billion will be distributed nationwide to some 750,000 borrowers.

TIMELINE

• Over the next 30 to 60 days, settlement negotiators will be selecting an administrator to handle the logistics of the settlement and monitor compliance.
• Over the next six to nine months, the settlement administrator, attorneys general and the mortgage servicers will work to identify homeowners eligible for the immediate cash payments, principal reductions and refinancing. Those eligible will receive letters.
• This settlement will be executed over the next three years

Copyright 2012 Richard P. Zaretsky, Esq.

Be sure to contact your own attorney for your state laws, and always consult your own attorney on any legal decision you need to make. This article is for information purposes and is not specific advice to any one reader. Richard Zaretsky, Esq., RICHARD P. ZARETSKY P.A. ATTORNEYS AT LAW, 1655 PALM BEACH LAKES BLVD, SUITE 900, WEST PALM BEACH, FLORIDA 33401, PHONE 561 689 6660 begin_of_the_skype_highlighting 561 689 6660 end_of_the_skype_highlighting RPZ99@Florida-Counsel.com - FLORIDA BAR BOARD CERTIFIED IN REAL ESTATE LAW - We assist Brokers and Sellers with Short Sales and Modifications and Consult with Brokers and Sellers Nationwide! Shortsales@Florida-Counsel.com Website www.Florida-Counsel.com.

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