Underwater homeowners who were victims of the foreclosure abuses that took place in 2009 ad 2010 could receive approximately $125,000, according to a deal that's being inked between lenders and two federal government agencies.
Orange County Foreclosure Lawyer Vincent Howard understands that this Independent Foreclosure Review deal is actually separate from the $26 billion settlement made earlier this year between lenders and authorities in 49 of 50 states.
That $26 billion deal was the one in which banks promised to reduce the principle for underwater homeowners, as well as refinance certain mortgages to a lower interest rate and then compensate some of those who lost their homes because of an improper foreclosure.
This is different.
While there are potentially 4.5 million people eligible to receive a payment, only a small portion of those have responded to banks' solicitation letters informing them that their situation may be eligible for a review. In fact, as of the end of May, only about 350,000 had responded.
As a result, review deadlines were stretched by another two months, to the end of September, instead of the end of July.
In this deal, which is being overseen by the Federal Reserve and the Office of the Comptroller of the Currency, borrowers will get money for what they endured in a wide range of foreclosure errors and abuses directly related to the robo-signing scandal.
Borrowers will be compensated for everything from an error in fees to wrongful foreclosure.
It's part of an enforcement action agreement, in which 14 mortgage servicers (Chase, Citibank, Bank of America, PNC Mortgage, Wells Fargo, MetLife Bank, HSBC and others) hired independent consultants to examine their alleged foreclosure abuses and they would in turn compensate anyone who suffered financial harm as a result of those abuses.
Federal guidelines were recently released on how this compensation is supposed to be meted out across the board, in an effort to ensure homeowners are treated fairly across the board by the different institutions.
Some of those guidelines include:
- Military members who lost their homes to foreclosure during active duty will get the value of their home's equity at the time of the foreclosure, plus an additional $125,000. So let's say the soldier owed $100,000 on a home worth $150,000 when it was foreclosed upon, he or she would now stand to receive $175,000.
- Borrowers who were folded into the foreclosure process, despite the fact that they weren't actually in default, will be compensated by $15,000 if they were able to save their home, and $125,000 if they lost it. If it was cancelled by the bank before it was completed, the borrowers may still be eligible for a $5,000 payment.
- Homeowners whose homes went into foreclosure during successful trial modifications would be eligible for $125,000, or $15,000 if they were able to get their home back. If the foreclosure was stopped, the lender will be under obligation to complete a permanent modification, plus pay another $5,000. If the bank can't complete that modification, the borrower will be entitled to $35,000.
- Homeowners who were snagged by errors or other issues with loan modification will be eligible for a $15,000 payment.
Orange County Foreclosure Attorney Vincent Howard at Howard Law can help. You can reach us toll-free at 1-800-872-5925 or send us a message online.
Homeowners to receive up to $125,000 for foreclosure abuses, By Les Christie, CNN Money