Recent updates regarding the federal government and the mortgage crisis show that further relief is on the way for homeowners who are looking for ways to stop foreclosure and resolve other debt problems. In addition to the relief available via Chapter 7 and Chapter 13 bankruptcy, many homeowners have pursued mortgage modifications with varying success.
The effectiveness of foreclosure mediation and other strategies for keeping residential real estate is dependent on several factors. Working with an experienced debt relief attorney, the extent to which a home is “under water,” the desire of one spouse to remain in the family home after divorce, and other issues can affect the prospects for long-term success.
Major changes in federal lending regulations and other high level legal solutions are also gaining momentum. From a landmark legal settlement with the five biggest mortgage servicing companies to several key indicators of the health of the housing market, debtors who have struggled with mortgage-related financial problems have received some recent good news.
Latest Federal Housing Scorecard Looks at Success in Preventing Avoidable Foreclosures
Every month, the U.S. Department of Housing and Urban Development (HUD) and the Department of Treasury issue a Housing Scorecard to assess the progress of federal efforts to stabilize the housing market and enhance the financial security of American homeowners. These efforts have included housing initiatives by state and local agencies, homebuyer tax credits, community development programs, mortgage modifications and refinancing incentives, and increased consumer protections.
The January 2012 scorecard included mixed news regarding the health of the housing market, but increasingly positive news on other fronts:
- While housing inventory decreased significantly toward the end of 2011 and sales of existing home prices increased, new house sales saw a decline and prices remained fragile
- New mortgage delinquencies continued to decrease, and millions of families have benefitted from permanent mortgage modifications under the Home Affordable Mortgage Program (HAMP), which was recently made more widely available
- Reviews of the long-term effectiveness of HAMP show that 84 percent of applicants received a modification and 94 percent of those were still in their homes six months later
In addition, the Administration continues to tout the positive effects of the controversial Federal Reserve and Treasury Mortgage-Backed Securities purchase programs, and emphasizes that mortgage interest rates remain at record lows. According to data from the National Association of Realtors included in the latest scorecard, home affordability has been getting steadily better since bottoming out in July of 2006.
Foreclosure Abuse Settlement Will Provide Nearly $200 Million of Relief in Connecticut
One of the most important developments since the beginning of the mortgage crisis is the recent announcement by U.S. Attorney General Eric Holder that he and 49 state attorneys general had reached a $25 billion settlement with the five largest mortgage servicers in the U.S. The agreement addresses mortgage servicing and foreclosure abuses, including notorious “robo-signing” practices that undermined the accuracy and integrity of home-lending processes.
The settlement resulted from cooperation among state and federal banking regulators, as well as coordination among enforcement agencies such as the Department of Treasury, the Federal Trade Commission, the Consumer Financial Protection Bureau and the Justice Department’s Civil Rights Division. Holder identified the agreement as “the largest joint federal-state civil settlement in history.”
The agreement, which resulted from 15 months of negotiations, applies to Bank of America Corporation, JPMorgan Chase & Co., Wells Fargo & Company, Citigroup Inc., and Ally Financial Inc. (formerly known as GMAC). With the potential to extend the settlement to nine smaller servicers, the benefits to borrowers and taxpayers nationwide could exceed $30 billion.
Participating mortgage companies will be forced to discontinue egregious mortgage servicing abuses, and new protections for homeowners are intended to prevent future fraud and other misconduct. The mortgage abuse settlement also provides financial assistance to eligible borrowers in the form of reductions in mortgage principal and additional opportunities for refinancing loans.
The settlement brings $190 million in relief to Connecticut, including $119 million toward loan term modifications, $1,500 cash payments to borrowers who suffered servicing abuses, and $36 million for loan refinancing programs. Connecticut Attorney General George Jepsen, who was a member of the negotiating team, touted the value of the financial relief, but also stated that “the new servicing standards are at least as important.”
Helping Clients Explore Their Full Range of Debt Relief Options
As welcome as this landmark legal settlement is to homeowners, it also means additional choices and complexities for those who want to pursue a comprehensive debt relief strategy. A Connecticut bankruptcy attorney can help clients sort through their assets and obligations and advise a sequence of measures that can lead to a stable financial future.
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