“What’s in it for me?” is the question many current and former Georgia homeowners were asking Friday, a day after a major mortgage settlement was announced between the state and five major mortgage lenders.
While the answers to that question and others remain to be worked out, there are some clear specifics to the deal, which is designed to help stabilize the the state’s mortgage industry and provide some relief to Georgians facing foreclosure or who have already lost their homes to it.
First, Georgia’s share of the settlement will be about $814.7 million, the majority of which banks will use to either write down balances on loans that exceed a home’s current value, or refinance loans in a way that lowers interest rates to today’s rates and brings down monthly payments, or compensate former customers who lost their homes improperly to foreclosure.
To benefit, you must have been a customer of Wells Fargo, Bank of America, JPMorgan Chase, Ally Financial (formerly GMAC) or Citigroup between Jan 1, 2008, through Dec. 31, 2011. These are the only financial institutions mentioned in the settlement. If your mortgage was with one of these banks originally but was later sold to another lender that isn’t among the five mentioned, you aren’t eligible to participate.
The banks in the settlement or an outside settlement administrator will contact homeowners who stand to benefit from the settlement in the coming months.
“Over the next week or two, or three, it’s expected that several of the next largest mortgage lenders in the country will also join this settlement,” consumer reporter Clark Howard said on his WSB Radio show after the settlement was announced Thursday.
Howard said millions of Americans should benefit from the settlement, though he acknowledged to listeners that the settlement may not appear to be fair to the majority of homeowners who have paid their mortgages on time and lived up to terms of a loan.
“It’s a rotten deal for you and a great deal for the number of people who will get a mortgage write-down,” Howard said.
The biggest beneficiaries will be customers who are current on their mortgage payments but are “upside down”, meaning their home is worth much less than what they owe the bank. Banks will be able to use some of the settlement amount to lower the principal, thus agreeing to accept less than the original loan amount. The average principal reduction is expected to be about $20,000.
“The greatest share of money is going to go to the write-down of balances,” Howard said. “That is the No. 1 part of this.”
Lenders will also have the option of dropping the interest rates on loans to today’s low rates, or making other modifications to the terms of a loan to reduce monthly payments, especially for those facing foreclosure.
For those who were improperly foreclosed on, lenders will issue checks of between $1,800 and $2,000. Again, the banks will contact customers who fall into this category.
One of the pluses of the settlement is that banks are required to provide customers with one point of contact.
“People who have been distressed in their loans have complained to me all through these years, since the housing market fell apart, that you can never talk to the same person twice at a lender and you get a different story every time you talk with your lender,” Howard said
It’s too so soon to say how many Georgians will benefit or when checks will be mailed. The banks have up to three years to make these changes.
“It’ll take the rest of this year before people start getting offers,” Howard said on his program. “You will get an offer from the bank in the mail saying you will be able to [refinance] or you will be eligible for the balance reduction.” He added that banks, however, have an incentive to get things done within 12 months.
Also, customers who feel they were improperly foreclosed upon can still sue the lenders.
More information is available on the agreement at nationalmortgagesettlement.com. And here are the numbers for the lending institutions if you want to call them directly: Wells Fargo: 800-288-3212; Bank of America: 877-488-7814; JPMorgan Chase: 866-372-6901; Citigroup: 866-272-4749; Ally/GMAC: 800-766-4622.
(Excerpts provided by the Clark Howard Show on AM 750 and 95.5 FM News/Talk WSB contributed to this report.)