There has been a lot of talk about the $25 billion settlement the government reached with the nation’s five largest mortgage servicers. Among the 49 states listed in the complaint was Florida, where residents have been hit especially hard by mortgage foreclosures. According to reports, Florida is expected to receive $8.4 billion from the settlement.
As part of the settlement, the participating mortgage servicers must consider alternatives to resolve problematic loans. These options include mortgage loan modifications, principal reductions, forbearances and short sales. Everything is on the table, and everything must be on the table before a servicer can file a notice of default.
The settlement also stipulates that mortgage servicers cannot pursue foreclosure against properties on which borrowers are attempting in good faith to work out their mortgages. In addition, the settlement requires participating servicers to set aside a minimum of $10 billion to reduce outstanding principal owed to lenders.
An additional $3 billion will be set aside to refinance mortgages that are currently underwater. (A mortgage is said to be underwater when the value of a home is lower than the amount the borrower owes.) The settlement also sets aside additional money for education, community outreach, financial counseling and legal services.
With the new push for these mortgage servicers to consider workarounds before foreclosure, more homeowners in Florida may find a way out their own financial crises before it’s too late. If homeowners do find themselves in a situation in which they are negotiating a new mortgage with a lender, it is important to know exactly what options are available.
Source: Miami Herald, “Signs point to (possible) relief for distressed housing market,” Peter Zalewski, Feb. 27, 2012