Mortgage relief coming for some Michigan homeowners
$25 billion Attorney General settlement for mortgage abuses promises relief to Michigan.
The Department of Justice confirmed a $25 billion settlement on February 9 between the Federal Government, 49 States’ Attorneys General, and the five largest mortgage servicers. It addresses loan servicing and foreclosure abuses that contributed to the mortgage crisis and encompasses mortgages owned by Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial (formerly GMAC).
However, the settlement does not encompass any mortgages owned by Fannie Mae and Freddie Mac, who hold about two-thirds of home mortgages. To look-up who owns your loan, go to Fannie Mae loan lookup or Freddie Mac corporate. If your mortgage loan is owned by someone else, you may be entitled to relief.
Banks will have three years within which to fulfill their obligations with incentives to take action in the first year and a requirement that 75% of payments be made by the end of the second year. In addition to the monetary payouts, the settlement changes mortgage servicing requirements and provides for strict oversight of the banks’ compliance.
Eligible homeowners who were foreclosed on between Jan. 1, 2008 and Dec. 31, 2011 may receive $1,500 to $2,000. Current borrowers may receive relief by reducing the principal on loans, refinancing to lower interest rates and preventing foreclosure by other means, such as, forbearance, short sales and deeds-in-lieu of foreclosure.
In addition to the monetary penalties, the settlement overhauls the requirements pertaining to mortgage servicing, handling foreclosures and ensuring the accuracy of information filed in bankruptcy courts. To give teeth to these revisions, the settlement provides for penalties of up to $1 million per violation and up to $5 million for repeat offenses.
It is important to note that the settlement does not prevent State Attorneys General from bringing criminal charges against the banks where appropriate. In fact, several states, including Michigan, have criminal investigations underway and others have already initiated criminal charges. Furthermore, homeowners eligible for relief under the settlement do not have to give up any rights to sue for specific abuses. All claims against the Mortgage Electronic Registration System (MERS) are preserved as well.
Michigan Attorney General Bill Schuette announced that approximately $800 million will benefit Michigan and its current and former homeowners. Schuette has proposed an allocation of the $101 million fund goes directly to the state as follows:
- $20 million to foreclosure counseling through MSHDA
- $10 million to foreclosure rescue scam restitution
- $35 million to borrowers who suffered foreclosure
- $5 million in special veterans’ assistance
- $25 million to children made homeless by foreclosure
- $6 million to the Michigan Attorney General Home Protection Unit to ramp up the investigation and prosecution of foreclosure crimes and consumer protection education and assistance
A frequently asked questions document, where you can find out what this means, is provided by the Michigan government.