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Millions of homeowners who lost their homes to an abusive foreclosure process during the housing crisis will soon learn if they are eligible for a payment from the landmark $25 billion mortgage settlement.
Unfortunately for Californians, if every potentially eligible homeowner lands a payment, the amount could be as piddling as $650. Nationwide, the figure could be as high as $2,000.
Either way, the payments are relatively small compensation for abuses suffered during foreclosure and offer little consolation for the loss of homeownership.
California Attorney General Kamala D. Harris recently announced, under a provision of the $25 billion National Mortgage Settlement, claim forms were being sent to an estimated 430,000 California borrowers who lost their homes to foreclosure between January 1, 2008 and December 31, 2011 and may have suffered abuses during the process.
The settlement awarded California an $18 billion slice and the state earmarked about $280 million for those 430,000 Californians who lost homes due to foreclosure. That averages out to a payment of about $650 each.
Nationwide, the settlement earmarked $1.5 billion in restitutions for 750,000 borrowers foreclosed upon during the period, or about $2,000 each.
In both cases, the exact amount will depend upon how many people apply for the payment and how many actually qualify.
The forms for the settlement’s foreclosure abuse provision will go out from now until mid-October. Payment checks are expected by mid-2013.
Borrowers receiving the claim forms had mortgages serviced by Ally/GMAC, Bank of America, Citibank, JPMorgan Chase and Wells Fargo, the servicers that agreed to the April 2012 settlement with the federal government and attorneys general of 49 states and Washington, D.C.
The national settlement is payback for a twisted culture of foreclosure violations including “robo-signed” (forged or falsified) affidavits in foreclosure proceedings; deceptive practices, including “dual tracking” (simultaneously working a modification application and a foreclosure procedure on a mortgage); failures to offer non-foreclosure alternatives before foreclosing on borrowers with federally-insured mortgages; filing improper documentation in federal bankruptcy court, losing and misplacing crucial homeowner documents and generally giving distressed homeowners the runaround, rather than a single point of contact.
The National Mortgage Settlement is not to be confused with the national “Independent Foreclosure Review,” which also addresses abusive foreclosure practices, but is under the oversight of the Office of the Comptroller of the Currency (OCC) and the Federal Reserve and has the potential to provide former borrowers with up to $100,000.
As part of the settlement, along with restitution for wrongs during the foreclosure process, mortgage lenders have begun the process of doling out:
• Up to $17 billion for loan modifications with principal reductions on first and second liens and other forms of relief. The modification provision will continue for the next three years.
• Up to $3 billion in refinancing relief to allow current, but underwater borrowers to cash in on record-low interest rates.
Much of the balance of the settlement goes to the states in the form of punitive fines.
The settlement also came with overhauled mortgage servicing regulations which California effectively codified into state laws known as the “California Homeowner Bill of Rights.”
Borrowers and others should complete the claim form and return it as soon as possible in the envelope provided, or file the claim form online.
The deadline for all claims is January 18, 2013.
The one-page claim form is simple to complete, does not ask for personal financial information and the process is free. Do not provide personal information or pay money to anyone who calls or emails and claims to provide settlement-related assistance.
California borrowers suspicious of settlement-related scams should file an online complaint with the attorney general’s Public Inquiry Unit.
Borrowers do not need to prove financial harm to receive a payment, nor do they give up their rights to pursue a lawsuit against their mortgage servicer or to participate in the Independent Foreclosure Review Process.
Eligible borrowers also may receive payment from this settlement even if they participate in another foreclosure claims process. However, any payment received may reduce payments that a borrower may be eligible to receive in any other foreclosure claim process or legal proceeding.
Borrowers who believe they may qualify for a payment, but did not receive a notice because they have moved, or have questions and need help filing the claim, should contact the settlement administrator or call the toll-free line 1-866-430-8358.