Palm State Mortgage imagines most of you have heard the news that the Center for Responsible Lending (CRL)has announced a summary of the National Mortgage Settlement Agreement. Forty nine of the States attorney generals, the federal government, and five major financial institutions and their servicing subsidiaries, agreed on this settlement. To be sure, the $25 billion to settle claims against the financial instituions, has been a hot topic, but how exactly will the money be spent? Plus, we have all wondered about the standards that would be used for servicing the disbursement of funds.
Just as an update, the huge settlement happened in response to the abusive foreclosure processes used by the servicers. “These were detailed in five audit reports from the Office of the Inspector General for the Department of Housing and Urban Development.” Palm State brings you a few ledger notes from the Center for Responsible Lending summary: Five billion dollars of the settlement funds will be paid in cash to the state Attorney Generals. “1.5 billion dollars will be paid to foreclosed borrowers and for other uses to be determined by each state’s AG.”
CRL noted that “there is an intention but no requirement that those funds be used for foreclosure prevention activities such as housing counseling and legal services.
What about the little guy who got hurt by the big financial institutions ? It is clear that individual borrowers who lost homes to foreclosure from 2008 through 2011 will be “eligible for cash 
payments.” Surprisingly, in many cases, only $1,800 to $2,000 will be available. The Center admited that this was one of the weakest parts of the settlement as “borrowers might have to meet some difficult criteria to qualify for even this small benefit.”
At least $3 billion more will go for refinancing borrowers who are current on mortgages but remain “underwater.” Today’s blog only addresses information about the cash components of the settlement. In addition to the money, the banks must “pay” in other, “non-cash” ways. Click here to read about them.
The remaining $20 billion will go directly to borrowers as reimbursements to servicers. At least $10 billion of this will be used as principal reductions in loan modifications.
Warning! Palm State Mortgage wants to caution readers, friends and clients; there are many scam artists already taking advantage of people who might qualify for the funds.
Attorney General from Rhode Island, Peter F. Kilmartin, stated “there are unscrupulous scam artists seeking to take advantage of homeowners in desperate financial straits.” The scammer might claim to have lists or information for which they demand up-front cash.” Kilmartin clarified, “Individual lenders have set up special hotlines for borrowers to call with questions about the settlement benefits.”
Also, Palm State Mortgage wants you to know that in reality, there “are no fees required to participate in the Office of the Comptroller of the Currency’s Independent Foreclosure Review Program or in the Attorneys General settlement.” Read more details by clicking here.
Also in the document are many reforms to the future activities of the servicers, some of which we will bring to you in a future blog, in which we will reveal the future of “Robo-Signing.”
As always, we want to thank our readers, friends and clients for visiting Palm State Mortgage Blog, and we hope you will “friend” us, “share” us or give us a “pin!”
