On Feb. 9, it was announced that a settlement had been reached between 49 states within the US and the top 5 mortgage servicing entities including Bank of America, Wells Fargo, JP Morgan Chase, Citi and Ally. The settlement was a whopping $25 Billion Dollars.
The money will be used in three categories: (1) Toward the consumer, (2) To the States and (3) To the Federal Government.
(1) Consumers: Funds will provide borrower relief through principle reductions, loan modifications, short sales and borrower transition efforts. They designed this segment of the settlement to increase existing efforts by the servicers to keep a borrower in the home or help them transition out of the home gracefully. A second initiative will help current borrowers who owe more on their home than it is worth to refinance their ‘underwater’ properties.
(2) The states: Oklahoma is the only state that did not participate. Each of the 49 states that are part of the settlement will receive funding to help qualified homeowners that were foreclosed on during the 2008-2011 calendar years and to bolster existing and create new foreclosure prevention efforts. Brothers Redevelopment and other housing counseling agencies across Colorado are waiting for any news about the latter, as there is some potential for these funds to help provide housing counseling for homeowners.
(3) The Federal Government: Because the settlement agreement is not yet public, the details of how the feds will apply these funds are unknown. The feds are likely to would be to pay for settlement monitoring and public reporting. – Shannon Peer