In February, US Attorney General Eric Holder announced the unprecedented $25 billion national mortgage settlement with the five largest banks in the US. One of the provisions of the settlement is a $2,000 payment to homeowners who lost their homes to foreclosure.
A month later, people are asking, “When am I going to get my check?”
The answer is, “It depends.”
One thing is for certain. It won’t be this week or this month. It will take up to two months to select an administrator and six to nine months to actually get the ball rolling.
Then you have to meet a few other requirements.
- Did Bank of America, Citigroup, JPMorgan Chase, Wells Fargo or Ally Financial service your loan? If so, good, because the settlement only applies to them. But even then, you’ll only qualify if your loan was NOT a government-backed mortgage (such as FHA, VA, Fannie Mae and Freddie Mac loans), and which account for over half of home mortgages.
- Did you lose your house between Jan 1, 2008 and Dec 31, 2011? If so, good, because the settlement only covers those four years. (This period is for when the house went back to the bank or an investor, not the loan origination date, as some reports indicate.)
- Are you feeling lucky? The $1.5 billion set aside for these payments will cover 750,000 borrowers. We have no numbers on how many foreclosures these five lenders completed from 2008 to 2011, but there were roughly 3.8 million foreclosure sales during that period, over five times as many as will receive payments.
According to the national mortgage settlement site, eligible borrowers will be contacted. Given that everyone who is entitled to these checks has lost their home and have now moved, it will be interesting to see if they can actually find you. Hopefully you filled out a Change of Address with the US Postal Service.
Other provisions of the settlement include:
- $3 billion for refinancing lower interest rates for homeowners who are current on their payments but are underwater on their loan.
- $17 billion for principal reduction and short sale assistance for homeowners who are in default.
While this “unprecedented” settlement will certainly help a few individuals, it is, as we’ve said before, an absolutely meaningless amount of money when compared to the $4 Trillion in excess mortgage debt that created during the credit bubble.