A couple months ago, five of the biggest home mortgage holders settled a nationwide dispute with the state attorneys general and the federal government about their illegal foreclosure and loan servicing behavior. This is the “largest consumer financial protection settlement in US history.” Although most of the $26 billion or so of this settlement is earmarked to help present homeowners keep their homes, $1.5 billion of it will go to about 750,000 former homeowners who lost their homes to foreclosure. Depending on the number of people who qualify, the anticipated award is $1,500 to $2,000 to each.
Here are the answers to the most immediate questions about this cash award, and where to go for more information about it.
What foreclosures are included?
- The settlement, including this cash payment for those whose homes were foreclosed, applies only to mortgages held by these five home mortgage lenders and their subsidiaries: Bank of America, Wells Fargo, JP Morgan Chase, Ally/GMAC and CitiGroup. To find out if your foreclosed mortgage is included, go to the special website for this settlement for the toll-free phone numbers and websites of these five banks. (Go to near the bottom of the right column, under “Settlement Parties.”)
- Your “owner-occupied, one-to-four unit” residence must have been “finally sold or taken in foreclosure between and including January 1, 2008 and December 31, 2011.”
- You made at least 3 payments on the mortgage, and the property “was not abandoned by the homeowner or condemned prior to the time of the foreclosure sale.”
- If your foreclosure happened in a state other than Oregon, be aware that every state joined this settlement, except for one–Oklahoma— so homeowners foreclosed there are not eligible.
How do I qualify to receive the settlement money?
- You will need to fill out a “claim certification form” stating under penalty of perjury that:
- You “lost the home to foreclosure while attempting to save the home through a loan modification or other loss mitigation effort;” and
- “Servicer errors or misconduct in the loss mitigation or foreclosure processes affected the borrower’s ability to save the home.”
We are not perfectly clear on what “other loss mitigation effort” might include, or how much effort would qualify. Would it be enough, for example, if you had proposed a schedule for catching up on the arrearage and your bank refused to accept your terms, or you could not meet its payment schedule? And how do you even know whether there were “servicer errors or misconduct” which “affected” your ability to save the home? So much of the banks’ bad behavior happened without borrowers’ knowledge so on the face of it this seems like an unfair requirement. We’ll have to see if there will be any clarification of these requirements in the upcoming weeks.
- What IS clear is that former homeowners will NOT need to release any potential claims against their mortgage holder in order to receive the money.
What’s the procedure and timetable?
- A Settlement Administrator is being selected now by the “Monitoring Committee“ (which includes the Oregon Attorney General) “to administer the distribution of cash to individual borrowers.”
- Over the following five to eight months, this Administrator will work with the banks and the state attorneys general to identify the eligible former homeowners, and contact them to apply for the payment. Information on how to file a claim will also be posted on the national settlement website referred to above. There will be a yet unannounced deadline to file claims.
- If you are concerned about the Administrator having your current address, you should contact your Attorney General’s Office to have it send your address to the Administrator. In Oregon we don’t know exactly which person or department of Attorney General John Kroger you should contact. But here is a contact form his office has provided to use to keep you updated on the settlement.
- The amount to be distributed to each foreclosed homeowner will depend on how many people apply and are found to qualify. Given the ambiguities in the language as mentioned above, it is impossible to say how much each award will be—the tighter those rules are interpreted, the less people in the pool, and the more money for each. Also, because the $1.5 billion paid by the banks for these payments also pays for and is thus reduced by “the costs and expenses of the Administrator”—a totally unknown amount so far—that reduces what will be available for the foreclosed homeowners.