Rochester, N.Y. -- The nation's top mortgage servicers will have to fork over $26 billion dollars for their role in the country’s mortgage meltdown. This follows years of negotiations after claims that Ally, Bank of America, Well Fargo, Citigroup and JPMorgan Chase “robo-signed” loans and rushed home foreclosures.
“I'm satisfied that the settlement today will provide real relief for New Yorkers,” says New York Attorney General Eric Schneiderman. “We have one in ten mortgages in the state that are at risk of foreclosure.”
New York will receive about $784 million as a part of the settlement and nearly 46,000 New Yorkers would benefit from it. Much of the settlement will go toward loan modifications and refinancing.
“Some people are going to get principal reductions, where the actual amount they owe comes down,” says Schniederman. “Some people are just going to come in and get a lower interest rate to introduce lower monthly payments. There’s a menu of options that are available that are going to be communicated to home owners.”
Here's how the numbers break down:
- $495 million will be used for loan modifications
- $140 million for refinancing
- $136 million to go towards legal aid and homeowner assistance groups
- $13 million for people whose homes were wrongfully foreclosed
Schneiderman says as a part of the settlement, he will still be able to pursue other lawsuits against the banks.
“[This settlement] is not going to give immunity for the conduct that brought down the American economy,” he says. “We are still pursuing aggressively the worst of the conduct while obtaining some meaningful relief as a down payment on to bigger and better things to come.”
Emily Silipini, a loan officer with First Rochester Mortgage, wonders if the settlement would be enough to truly help people, especially those who have lost their homes to foreclosure. New Yorkers who lost their homes will receive about $2,000.
“I'm not certain what those funds will really accomplish,” Silipini says. “Two-thousand dollars isn't a lot of money.”
She says she’s curious to see what programs the banks will roll out to help homeowner refinance or modify their loans. Until she knows more, she’s skeptical.
“I just don't see how it's going to help. It's possibly a start in the right direction, but I think it has to come a long way.”
According to ABC News, the average homeowner who is helped through this settlement could see $20,000 taken off their loan balance. If their mortgage rate is 7%, and if they’re in $175,000 in debt, the new plan could bring their rate down to 5.5 percent. Theose savings would add up to $250 a month or $3,000 a year.
Fannie Mae and Freddie Mac hold more than half of the nation’s mortgages; however, these servicers are not a part of the settlement.
Schniederman says he’s working on extending the settlement to include other banks and mortgage servicers.
He also points out that homeowners do not need to reach out to the banks. As a part of the settlement, the five banks agreed it was their responsibility to reach out to homeowners to notify them of their eligibility.