National Mortgage Settlement Disputes

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 What Is the National Mortgage Settlement?

The National Mortgage Settlement was established in 2012. It occurred as a result of the mortgage and housing crises. Under the terms of the settlement, five large mortgage lender corporations agreed to pay $25 billion to avoid foreclosure and mortgage-related challenges.

The agreement is also known as the “$25 Billion National Mortgage Settlement.” Many conditions must be met by the claimant in order to qualify for dispersions. The qualifications are complicated and incorporate a number of elements, including:

  • The number of mortgage payments
  • The start date of any foreclosure proceedings (generally must be between January 1, 2008, and December 31, 2011)
  • Calculations involving an outstanding balance
  • Any mistakes made by the mortgage processor

A real estate or tax attorney is usually required when applying for the settlement.

The agreement resolved state and federal accusations against Ally/GMAC, Bank of America, Citi, JP Morgan Chase, and Wells Fargo that they habitually signed foreclosure-related documents without knowing if they were correct, a practice known as “Robo-signing” at the time.

The settlement awarded approximately $50 billion in relief to distressed borrowers who had been affected by unlawful foreclosures, as well as direct payments to states and the federal government.

The settlement provided a remedy to servicemembers who had their homes unfairly foreclosed on, charged higher loan rates in violation of the Servicemembers Civil Relief Act, or were compelled to sell their homes at a loss owing to Permanent Change of Station (PSC) orders.

Later, similar agreements were reached with HSBC, Ocwen, and Suntrust. The CFPB was a party to these subsequent settlements.

Key Terms of the Settlement

Assistance was given to homeowners in need of loan modifications, such as first and second lien principal reduction.

Servicers were required to provide up to $17 billion in principal reduction and other loan modification relief across the country.

Under the settlement’s provisions, they ended up providing more than $50 billion in gross relief, which translated into $20.7 billion in credited relief.

Borrowers had the opportunity to refinance at record-low interest rates. Servicers were supposed to provide up to $3 billion in refinancing relief countrywide, but only $3.6 billion in credited refinancing relief was provided.

A total of $1.5 billion was disbursed to qualified borrowers across the country. The National Mortgage Settlement Administrator delivered Notice letters to eligible borrowers in 2012, and payments to borrowers who submitted valid claims were mailed in 2013. The time for submitting a claim form has passed, and no new claims are being accepted.

If you have any questions, please call the National Mortgage Settlement Administrator at 1-866-430-8358.

No other federal or state entity had ever been able to implement the first nationwide modifications to servicing requirements.

These servicing standards necessitate a single point of contact, adequate staffing levels, and training, improved communication with borrowers, appropriate standards for executing documents in foreclosure cases, eliminating unnecessary fees, and eliminating dual-track foreclosures for many loans.

National banks were expected to report on a regular basis to an independent, outside monitor who reports to state Attorneys General on their compliance with the settlement.

Servicers were required to pay significant penalties for non-compliance with the settlement, including missing deadlines.

Banks Are Still Liable for Other Claims Not Covered By the Settlement

This agreement holds banks liable for misbehavior in the areas of residential mortgage foreclosures and mortgage servicing. This settlement does not seek to hold them accountable for all of their mistakes over the years, and the agreement and its release leave legal avenues open for others to pursue.

This agreement, in particular, does not:

  • Discharge or grant any criminal culpability
  • Release any individual private claims or class action claims.
  • Release claims arising from the securitization of mortgage-backed securities, which were central to the financial crisis.
  • Allow claims against Mortgage Electronic Registration Systems or MERSCORP to be released.
  • Release any claims brought by a state that refuses to sign the settlement.
  • Stop state attorneys general from investigating Wall Street for financial fraud or financial catastrophe.

The agreement addresses only some aspects of the banks’ financial crisis-related behavior (foreclosure procedures, loan servicing, and loan origination) in exchange for the second-largest state attorney general recovery in history and direct assistance to troubled borrowers while they can still use it.

For example, state lawsuits against rating agencies and bid-rigging in the municipal bond market continue. Claimants’ and investigators’ inquiries into how Wall Street bundled mortgages into securities are also ongoing.

What Are Some Disputes Over National Mortgage Settlements?

The settlement, predictably, has resulted in a slew of mortgage settlement frauds and disputes. Some examples of conflicts and scams are:

  • Falsification of information on an application for eligibility
  • Using forged applications to get personal identification (similar to phishing scams)
  • Illegal charges
  • Using forged credentials or impersonating a professional
  • Various types of tax evasion

As a result, you should never give out any personal information to anyone you suspect. When dealing with agencies that claim to provide aid or services related to mortgage settlement, you should always check your credentials. Real estate law violations can result in a lawsuit and criminal proceedings against the breaching party.

Is There Anything Else I Can Do If I Can’t Pay My Mortgage?

If you are unable to make your mortgage payments, you should first try to negotiate with your lender to develop a revised payment plan.

Lenders do not like to foreclose on properties because the majority of foreclosures result in the lender losing money or just breaking even.

This means that lenders will not be paid the interest they would have gotten if the borrower had continued to make payments. As a result, foreclosure will most likely be a lender’s last resort.

Lenders may permit installment payments in addition to the borrower’s regularly scheduled payments.

Furthermore, borrowers should be completely informed of their rights and responsibilities as outlined in the mortgage contract they signed.

The following are some of the most common examples of foreclosure avoidance:

  • Short refinancing: Short refinancing permits a portion of the borrower’s debt to be removed and the remaining loan to be refinanced.
  • Short sale: A short sale occurs when the borrower sells the property for less than the amount still due. The proceeds of the sale are paid to the lender, and the remaining debt may be forgiven.
  • Loan Modification: A loan may be modified if the lender is ready to change the terms of the loan in order to be paid something rather than nothing.
  • Forbearance: Forbearance can temporarily halt foreclosure, giving the borrower additional time to pay the sum owed. and
  • Negotiation: Often, lenders will refuse to pursue a foreclosure since the foreclosure procedure is costly, and the entire loan amount may not be repaid. Instead, as previously noted, lenders may negotiate with the borrower to restructure their original loan or modify the mortgage agreement so that the borrower can afford to make timely payments.

Do I Need a Lawyer for National Mortgage Settlement Assistance?

The National Mortgage Settlement has created a market that is riddled with potentially harmful scams and disputes. If you believe you have been a victim of mortgage fraud, you should consult with an experienced mortgage lawyer. If you need to file a claim for damages, your attorney can assist you in examining your case and representing you in court.

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