Underwater? Help Is On The Way! Mortgage Relief from Fed

 

Well, my fellow Politicos, it’s been a wild week – so much to talk about! So many things that I have included a couple of links at the bottom of the post for you because there won’t be time to discuss them together here this week.

But the main thrust of my post this week is the issue that could affect your kitchen table politics the most.  Right now, 10.7 million homeowners in the U.S. are “underwater” in their loans, meaning that their homes are worth far less than when they purchased them. That’s one in every four families. The crisis is worst in Nevada, Arizona, Florida and here in California, where 30% of borrowers owe 50% or more of their home’s value. There are over a million California families who are upside-down, and ove a hundred thousand in New York alone. With such a large number of families in crisis, it puts any economic recovery at risk.

What choices do families who are underwater in their home loans have? Very few. You can’t afford to sell it at a loss because you’d still be deeply in debt; You can walk away from the home, like 588,000 homeowners did last year, even though they could still afford to pay the mortgage – just stop paying and let the bank foreclose. Or, like 40% of folks,  you can stay and keep paying your mortgage, if you can still make the payments, and continue to hope against hope that someday housing prices will rise to at least the level they were when you bought the house – if you got in at the early end of the bubble, your chances are better that if you ought at the peak. That’s where we are now, hoping against hope that something’s gotta give, having been taught all our lives that you don’t walk away from your debt, you keep your commitments. It is simply the integrity of the middle class homeowner that keeps the housing market even afloat right now.

So when The President came out in his State of The Union and said that he’d be uniting the State Attorneys General and the U.S. Attorney General to prosecute the responsible parties that caused this mess, prosecuting the banks that bundled our loans and used them as chips in their high-stakes game of Texas Hold-’em, I saw a glimmer of hope on the horizon. Then, within a matter of days, I heard that there was a $25 billion settlement with the banks – turns out it’s been six months in the making. Finally, someone addressing these abuses. And that’s what they are, abuses. But I also thought, “Hey, that was happening way too fast,” and I said to The Hubby that $25 billion won’t go far when we’re talking about the vast number of homes underwater. I was afraid that, like most lawsuits, the banks would be free and clear after that, having paid their fine, so to speak. So I started looking further into this new development – I wanted to see if we’d even be eligible, because most of the loan modification programs left us out in the cold.

And I’ll tell you what, my fellow Politicos, I am guardedly optimistic, for some families’ fates. The L.A. Times had a great article last week that outlined some of the basics of the deal.  I’ll summarize them here:

  • The main way the settlement will help homeowners will be what’s called a “principal write-down,” in which your actual principal is lowered by the bank to be more in line with what your house is worth. The expected principal reductions could be up to $35 billion.
  • Some folks will be allowed to do a short sale for what they owe. Basically, you would break even, without a foreclosure on your credit record.
  • Or, if you’ve already gone through a foreclosure, you might receive between $1,500-$2,000 for all the problems you encountered during foreclosure.
So, how do you know if you qualify? Call or go online and find out:

So, let’s say you qualify. When will you, realistically, see some relief? Well, first a Federal judge has to approve the settlement. That’ll probably take a few weeks. As soon as that happens, banks have to start compiling a trust fund of sorts for the eligible borrowers. There will be incentives for banks to work quickly, within the first year. But banks will have up to three years to pass out the funds to homeowners. 

One of the positive things about this deal is that it will change mortgage lending guidelines so that the Texas Hold-’em of the past cannot continue. New regulations are designed to make it easier for folks who are near foreclosure to be able to make their payment, and, ultimately, stay in their homes. Another important feature of the deal is that this is not the end; the AG’s deal does not eliminate the banks’ liability. They can still be sued and prosecuted further. Which is important – my immediate thought was that $25 billion won’t go far among the millions and millions of households at risk of losing their homes.

Now, one source stated that the deal only applies to houses purchased from 2008-2011. I’ll be looking into that to see if it’s the case, and let you know. If it is true, there are a multitude of families who are still out of luck, like mine. Also according to The Blaze:

$17 billion will go toward reducing the principal that struggling homeowners owe on their mortgages.

$5 billion will be placed in a reserve account for various state and federal programs.

A portion of that money will cover the $1,800 checks sent to those homeowners affected by the deceptive practices.

About $3 billion will help homeowners refinance at 5.25 percent.

This all seems like just a drop in the bucket, especially for those whose homes have already been foreclosed. Which is why it’s so important that banks have no immunity and can be further prosecuted.

And true to this statement, on Friday, New York Attorney General Eric Schneiderman sued three of the biggest banks for fradulent lending practices and use of false documents in foreclosures – that’s where the electronic recording of loans was done to end-run local registrar’s offices – now banks can’t find your mortgage, the paperwork that shows they own your house in the MERS database (The Mortgage Electronic Registration System). Often no paperwork exists, due to the “robo-signing” of loans in this registry. MERS saved the banks $2 million in county registrars’ fees.

Delaware Attorney General Beau Biden speaks about this as only a beginning:

He and other state AG’s will be continuing to fight for more in their states, but The President has opened lines of communication with the Federal AG so that more of these multiple-state prosecutions can be done. Biden fought hard for the rights of states and the feds to continue their prosecutions. “It should not have taken the Federal government, the state AGs, HUD and the United States Department of Justice to force the banks to do what they should do, and might ultimately have to do anyway, and that’s write down some of the principal.” And that’s the moral and ethical issue here. Once again, we find that corporate profits reign over morality every time. That’s why this is such an important settlement – it is the government standing up for the little guy, for the rest of us.

And that’s why I am cautiously optimistic. While our loan won’t be covered, if my sources are correct, I am hopeful that this is not the end. Because we were raised to do the right thing, and that includes not walking away from our debt. I hope that we’ll be able to find a way to refinance at a decent interest rate, or that the banks will write off part of the principal we owe, but I can’t see the light at the end of the tunnel yet. I hope that Attorneys General like Holder, Schneiderman and Biden keep fighting the good fight for us and so many other hard-working and honest families like ours.

There are a couple of other “Must-reads/sees” this week:

A huge week for homeowners, a giant step forward for LGBTQ rights, “personhood” amendments on the march to wipe out birth control. What’s your story of the week, my fellow Politicos? What’s the talk around your kitchen table? Speak out here at Kitchen Table Politics!