In what some have referred to as a historic settlement, Bank of America has reached an agreement with the U.S. Department of Justice over the bank’s role in contributing to the 2008 mortgage crisis. The $16.65 billion settlement agreement is the second-largest such agreement reached between the federal government and a bank: JPMorgan Chase & Co. settled last year for $13 billion, while Citigroup settled for $7 billion. According to U.S. Attorney General Eric Holder, Bank of America engaged in a variety of schemes designed to defraud other banks and financial institutions. Some of these schemes involved misrepresenting to private and federally-backed banks and institutions the financial soundness of residential mortgage-backed securities it was offering for sale.
Relief For Homeowners May Not Be a Cash Handout
Almost $7 billion of Bank of America’s settlement is designed to provide relief to distressed homeowners (the remaining $9.6 billion settlement consists of $5 billion in penalties and $4.6 billion in remediation payments). The settlement agreements with JP Morgan Chase and Citigroup also contained similar provisions designating a certain amount of money for homeowner relief. In describing the administration of the JP Morgan Chase settlement, Attorney General Holder described that an independent monitor would be appointed to distribute the amount set aside for homeowner relief.
But contrary to the beliefs of some, this does not mean that homeowners can expect to receive a check in the mail from Bank of America (or from any other bank, for that matter). Instead, the amounts designated for homeowner relief are meant to provide other forms of relief for distressed homeowners and communities, such as:
- Reduction of principal owed;
- Suspending payments on some mortgages;
- Donating foreclosed properties to community groups; and
- Writing new mortgage loans in distressed community areas.
If There’s No Handout, How Are Homeowners Helped?
Because of how the $7 billion of the Bank of America settlement will be used to “help” homeowners, some homeowners who find themselves in trouble with their mortgage payments or who are facing foreclosure may find little comfort in the news of this settlement. But it is important to remember that, while homeowners whose mortgage was or is through Bank of America will not suddenly see checks arriving in their mailbox, the $7 billion is meant to encourage Bank of America to provide foreclosure alternatives to homeowners in trouble. This can involve:
- Forbearance: a temporary postponement of a payment or payments;
- Repayment plan: allowing a homeowner to temporarily make larger payments to cover current installments as well as pay toward missed payments; or
- Loan modification: modifying the terms of the loan, either by adding the missed payments to the end of the loan term (increasing the length of the mortgage) or by changing interest rates
Seek the Assistance of a Real Estate Attorney
If you find yourself in trouble with your mortgage payments, it is imperative that you act quickly in order to save your home. The real estate attorneys at the Klok Law Firm, LLC are experienced and dedicated to helping homeowners keep their houses. Contact us for a free consultation today to explore your options.