New mortgage settlement: What’s in it for you?

“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.)

68 comments Add your comment

smart

February 10th, 2012
4:02 pm

so you foreclose on a home and somehow it’s the banks fault?

Arlo

February 10th, 2012
4:04 pm

So screw all of us that borrowed money we could afford, kept up with the payments (even in this economy) and are facing the same losses in terms of property values. We should give out free health care, cell phones and EBT cards to people that are 2nd or 3rd generation welfare recipients as well…oh wait, we already do!

Paul C.

February 10th, 2012
4:16 pm

How ’bout all of us who are stuck with Chase Home Finance, make payments twice a month fully paying by the end of the month, and yet still get assessed late fees by Chase because their system “can’t handle partial payments”?
Heck, even the IRS can handle partial payments on a tax debt, yet Chase can’t handle them on a mortgage that specifically has no prepayment penalty.

Marge

February 10th, 2012
4:19 pm

Why did the banks issue loans to people who could not afford to own homes? I got approved on a waitress salary back in 2000 for a $150k home, with $500 down and 10% interest. Do you think I had a clue I should not have owned a home… Plus I was 25! they were practically pushing homes one people.

Randall

February 10th, 2012
4:20 pm

@Smart…the banks didn’t give a damn when lending the money to folk who were woefully unqualified.Yes, it’s the bank’s fault for making a risky loan and then selling it at a discount within 60 days, effectively wiping their hands clean of the original debt. Please educate yourself on what really caused this mess before you post ignorant comments.
@Arlo…go to hell. you’re an idiot. (see my comments above for Smart)

Jimmy Durham

February 10th, 2012
4:24 pm

I never dreamed that America, would become what it has today.The people that work and obey the rules are the ones that get screwed.The message now is stay at home have kids and buy the things that you can’t afford and wait for the democrats to buy your vote by taking away from the people that play by the rules and give to the ones that do nothing but make the wrong choices.

Vince Drooley

February 10th, 2012
4:25 pm

@Randall….a typical liberal response. Let’s blame everyone else for my problem. How about those folks who purchased houses they had no way of possibly affording the payments on accept some personal responsibility for their actions. If your salary is $20,000, you should know that there is no way you can afford to live in a $500,000 house regardless of what a bank or other lending institutuion tells you.

Jimmy Durham

February 10th, 2012
4:30 pm

Marge,you should be smart enough to know what you can afford.So don’t blame someone else for your by judgement.The federal government told the banks that they had to make loans to people that they knew could never paid it back.

crackertroy

February 10th, 2012
4:33 pm

How else do you expect Obama to be re-elected? Handouts for votes, very simple political strategy.

Name (required)

February 10th, 2012
4:35 pm

Another bailout? Thanks deadbeats! You deserve to be homeless….or worse…RENTERS!

crackertroy

February 10th, 2012
4:37 pm

@Randall, please educate yourself that the banks were forced to give loans to people who were not qualified because they were claimed to be “racist” and “discriminatory” (i.e. they were forced to not ask for citizenship as a loan qualification). Of course they sold them off in 60 days, they didn’t want to give the people the loans in the first place. But, as it were, you’ve been brainwashed by the media to believe the big bad wolf banks are responsible, hard to reverse that.

Randall

February 10th, 2012
4:40 pm

@Vince…a typical uneducated response. The banks had no business approving loans for people they KNEW were unqualified. The banks should have been the safe guard. Just look to a couple years ago when credit was tight everywhere: credit card companies were slashing credit limits, car loans were not being approved, and mortgages were harder to get than a poor southern republican (you know the ones who live in trailer parks, have dixie flags and are barely able to make ends meet, but consistently vote againist their own self interests. The republican party doesn’t care about you: they care about corporate profits and the rich. They appease southern republicans with social issues and the bible.) GTFOH. And before you even say it: my house is NOT in foreclosure, I am NOT upside down, and I’m not a part of this settlement (I’m with SunTrust). I don’t feel slighted in the least by this settlement. We allowed our elected officals to remove safe guards in the banking industry (Glass-Stegall Act); to repeal other reforms; and deregulate not only banking, but other financial insitutions (Wall Street). It’s simply a case of chickens coming home to roost. Americans need to realize we either sink or swim together… we need to rally together against corporate greed, lopsided tax policies and preferential treatment for the rich on every level in this country and demand policies that benefit the middle class.

iRun

February 10th, 2012
4:45 pm

Dudes, y;all are reading this wrong. All you’re thinking is “if you’re about to be foreclosed you’re getting a bail out.”

But this primarily to even up the difference between what your house is worth now and what it was when you bought it at the top of the market.

So, if you bought your house in 2006 for 400K and it was workth 450K. And now it’s worth 300K but you owe 350K.

So this deal settles the mortgage so now you owe 300 instead of 350.

This is about trying to even out the market.

Randall

February 10th, 2012
4:47 pm

@crackertroy…go get an education. I hold an MBA in finance and know what i’m talking about… the banks were never required to fund loans to people who could not afford to pay. the banks got greedy b/c they didn’t have to hold these loans on their books, effectively washing their hands, while makeing a profit. (Most of the mortgages were sold within 60 or 90 days in secondary markets at a discount and then packaged into mortagege backed securities that ot traded on Wall Street.) Sodl at discount means, for example, BofA originated a loan for $100k, then turned around and sold the right to collect on that $100k to another lender for say $90k, thus making $10k without assuming any risk.) get your facts straight dude.

iRun

February 10th, 2012
4:48 pm

I’m for this kind of deal.

And I am also current on my mortgage AND it’s not upside down.

But if you’re upside down in your house…out of no fault of your own…then you can’t afford to sell it to take that job in another state. Or something like that.

Mike S.

February 10th, 2012
4:49 pm

“What’s in it for me?” The first line of this article and the root of American society’s problem.

Mike S.

February 10th, 2012
4:53 pm

Randall, while on the way to getting your MBA, did you not have to learn grammar or spelling? Just askin’……

Mike S.

February 10th, 2012
4:57 pm

irun- there is a market risk with any investment you make, including real estate. In your logic of “out of no fault of your own, how is the bank now responsible to offset part of your loss from market risk? I sincerely don’t understand……obviously when I purchase a stock and it goes down in value, I don’t expect anyone to offset part of my loss.

Randall

February 10th, 2012
5:12 pm

@Mike S…they’re responsible to offset that risk because, in effect, they created and/or caused that risk with faulty, almost criminal lending practitces. A real estate loan is not the same as trading stock… also, when you purchasing stocks and bonds you are informed of the risk. No one told these people, “We are giving you this loan b/c we don’t have to be held accountable when you foreclose. We know you can’t afford this mortgage, but we will make our money by selling your loan in the secondary markets at a discount. And then we will start the process all over with another unsuspecting individual UNITL the market either crashes or laws are re-written”

Mike S.

February 10th, 2012
5:17 pm

Randall, I’m sorry, but that is a total cop out. There has to be personal responsibility for your own actions. Most importantly, if you read the settlement, these banks still own these loans; they were not sold. That seems to ruin your misguided logic…..

Randall

February 10th, 2012
5:20 pm

@Mike S… BTW, go sit on a fat one and twirl -maybe your crappy disposition will change. this is the comments section of a online newspaper, not an english class. i was typing fast and multi-tasking at work. yes, work! i know good and well you understood everything i was writing. if your only comments regarding my posts were for grammar, i’m so ok with that.

Mike S.

February 10th, 2012
5:23 pm

Sorry Randall, I didn’t realize they let you have a computer in your booth at the parking garage. I thought you were already back at your mom’s house.

Randall

February 10th, 2012
5:32 pm

Mike S… these banks, in many instances, originated, sold and bought loans (traded like a stock commodity) -so it’s really a muddled mess. Most of these banks have sub-prime subsidaries who originated these loans (or bought these loans as part of mortgage backed securities). To be clear they own these loans because they were originating them through their “regular” and sub-prime lending arms, or bought these loans in packages. For instance, Bank of America is primarily on the hook b/c of its Countrywide purchase. (Countrywide was a huge player in the sub-prime lending game). GMAC is on the hook b/c of its ResCap sub-prime lending arm. In these two examples, both enitities originated, bought and sold mortgages they knew were’t worth the security deed they were printed on.

T

February 10th, 2012
5:33 pm

Actually, this is pretty cheap on a “per vote” basis.

T

February 10th, 2012
5:37 pm

Randall, that Devry MBA is well worth the money huh?

Mike S.

February 10th, 2012
5:42 pm

Randall, in regards to your 5:32……I won’t argue with most of your post (though I don’t know what a “stock commodity” is) because it is not relevant to the point of this settlement. The homeowner purchases a home, the bank makes a loan (the mortgage), the home value goes down in value. How and why has the market risk shifted from the homeowner back to the bank?

Randall

February 10th, 2012
5:43 pm

@ T… I graduated from Goizueta… that’s Emory University if you “ain’t” know. lol

native atlantan

February 10th, 2012
5:46 pm

Guess Im one of the unlucky folks that have made all my monthly payments and am not past due or upside down. It stinks to be left out when you have done what you said you would do when you signed the papers at closing, and so many deadbeats will be getting a bonus from our govt and their big banks.

Jason

February 10th, 2012
5:47 pm

What the hell has happened to personal responsibility in this country???

iRun

February 10th, 2012
5:50 pm

@All – when I say by no fault of their own I mean the widespread tanking of home values.

Raise your hand if you bought a house between 2000 and 2008 and you’re now underwater.

*not me – I live intown where home values are stable

My point is….sooooo many people’s home are devalued. And I mean across the nation, that a very many hardworking people are in critical financial condition.

After all, a home is the most expensive thing 99% of American buy.

And I’m not talking simply about people who bought a home they couldn’t afford. I’m talking about everyone in that high-end suburban development. All the homes sold in 2005 for 500K and now they’re worth 300K. Everyone there is current on their mortgages AND they current mortgage payment is affordable for them.

But if they tried to sell their house they would take such a loss it would likely destroy them.

Again, not talking about myself. My house was worth 400K when I bought it and it’s worth 410K now…it actually rose in value, very slightly.

T

February 10th, 2012
5:52 pm

Emory has a business school?

iRun

February 10th, 2012
5:53 pm

@native atlantan – if you’re crrent on your mortgage and you’re not underwater then there’s no reason to make what you owe on it match what it’s worth. You’re already there.

This just means that person who bought that 500K house now has a 300K house and a 300K mortgage.

New World Man

February 10th, 2012
5:55 pm

Next will be Fannie and Freddie and the taxpayers on the hook.

T

February 10th, 2012
6:01 pm

Most of the money being “given away” will come from Ally Bank. Can any one tell me what Ally Banks former name was and whos money this is that BHO is having “given back”? Randall?…….Randall?…….Randall?

Randall

February 10th, 2012
6:02 pm

Mike S….(insert an “or” @5:32 between stock and commodity) these banks are culpable (and have admitted so by agreeing to this settlement). They’re culpable primarily b/c of their role in sub-prime lending, which caused the housing market meltdown in the first place. Many homes are underwater b/c of heavy foreclousures, which the sub-prime market caused. There’s also too much inventory (again caused by foreclosures, along with other factors). This will not be a big write-down for many homeowners. as the article states, the avg write down will be around $20k. If you’re $50k underwater, that helps a bit, but you’re still underwater. Part of this settlement is aimed at shoring up the housing market and encouraging underwater borrowers NOT to simply walk away, which many have done. I can foresee instances where an underwater borrower gets a $20k principal reduction, a lower interest rate and modified terms. If we don’t fix housing, the economy will never fully rebound. Yeah, it may suck for some who choose to see it that way, but hey life isn’t fair.

T

February 10th, 2012
6:06 pm

Per Randall – GOVERNMENT TO THE RESCUE!

Randall

February 10th, 2012
6:09 pm

@T… you’re so typical -making uninformed comments based on personal beliefs. read the article dude. it clearly states Ally’s lineage.

T

February 10th, 2012
6:11 pm

Who owns Ally there Skippy? Follow the bread crumbs……..all the way…….back to………where?

T

February 10th, 2012
6:13 pm

The only one here spouting the bailout talking points is our resident MBA.

Streetracer

February 10th, 2012
6:13 pm

Randell – We pretty much all know that life isn’t fair. But, over the last several years it seems to have gotten a lot less fair for the responsible than the irresponsible.

Randall

February 10th, 2012
6:15 pm

@T… it was 49 state attorney general’s who brought this lawsuit, not the Obama administration.

Under Water

February 10th, 2012
6:15 pm

is this settlement for mortgage payers who actively had a loan with those banks in that 2008-2011 time period or only for those who CLOSED on their mortgage during that time with those lenders?

Mike S.

February 10th, 2012
6:19 pm

Randall- I’m tired and I am going to go home now. Don’t believe for a moment the banks think they are culpable, at least not in this manner. They are settling to make it go away and get the government off their back. This is a “cheaper” solution for them. I believe, and you have not changed my thinking in the least bit, that the homeowner should be responsible for him(or her)self and the market risk that they bore. Two streams of thinking and two different opinions, that’s life! It’s just that yours is wrong! :-)

Randall

February 10th, 2012
6:48 pm

Mike S.- are you really that naive? this is a lot of money to just simply “make things go away.” lol. banks and corporations are greedy and would never agree to pay this much money if they were not culpable. your opinion really is misgudied and irrelevant at this point. the settlement is a done deal. deal with it! (i’m sure you’ll be voting for Newt in the GA republican primary.) good night dude!

Dave

February 10th, 2012
6:48 pm

There’s nothing in it for me and nothing in it for most people. And it lets the banks off the hook for their behavior. Tell me that Obama is a liberal, and please support it with facts.

Randall

February 10th, 2012
7:09 pm

@Streetracer…much of the pain we are experiencing now was years, and some would argue, decades in the making. Clinton repealed the Glass-Stegall Act, which was put in place as a result of the 1929 stock market crash. this removed the firewall b/t banking, insurance, and investment houses, leading to an unregulated derivatives market (mortgage backed securities trade here). failed Bush tax policies (tax breaks for the wealthy) turned a budget surplus Clinton left into the deficit that Obama inherited, not created. And let’s not mention the Iraq war, which cost us billions. many of us complain about personal responsibility, but what about corporate responsibility? through a flawed tax code, many corporations are essentially on “welfare” & avoid paying US taxes. Americans really have a short attention span.

Southern Man

February 10th, 2012
7:14 pm

“Equality” has a price while also treating people inequally. Some call it “fairness.”

Hugh Jass

February 10th, 2012
7:32 pm

Most people will qualify for a H.A.R.P. refi program regardless of their lender even if they are upside down. If you have not already called your lender about this call their customer service today and as if your loan qualifies. It has helped out MANY of my friends. I decided not to do it because I already have a low rate and there are some closing costs they roll into the loan. Everything is done in-house though.

native atlantan

February 10th, 2012
8:06 pm

Is it a coincidence, or are most folks that are in trouble with their homes in Atlanta, black ?

Bruce

February 10th, 2012
9:00 pm

@ Native atlantan—-relevance of your question???