Michael P. Ehline Property Insurance Law Blog on Lawyers.com

Legal settlement helps homeowners underwater on real estate

Saturday, February 11, 2012 by Michael P. Ehline

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Last Thursday, a deal was reached between the government and the five largest
mortgage lenders that will force to the giant banks to reduce loans or send
checks to almost 2 million mortgage holders. The agreement is no sweeping
panacea, just a bone the banks have agreed to throw toward a tiny proportion of
homeowners who so desperately need help. Here in Big Bear, for example, this is an issue.
The majority of the funds will go to
homeowners with underwater mortgages—those who now owe more on their loan than
their home is worth on the current market. They have no equity in their home so
they’ve been precluded from refinancing their loan to a lower rate.
It has
been reported in the media that roughly a million underwater homeowners will see
their loan principal typically reduced by an about of $20,000. However, 90
percent-plus of underwater homeowners will see no assistance at all. But some
mortgage holders may be qualified to refinance down to a 5.25 percent rate—which
should translate into sizeable monthly savings. I tend to wonder how all of this will effect the Big Bear real estate market overall.
A sweeping government
investigation found that some homes were improperly taken over. Companies used a
practice in which they used fake signature, or “robo-signing,” to expedite
foreclosures. Some companies failed to substantiate documents.
The deal will
oblige banks to use foreclosure only as a last resort. Lenders may no longer
foreclose on a homeowner who is under consideration for a loan
modification.
Law professor, Ray Brescia, has been quoted as saying that, if
this worked successfully, “it would help borrowers, lenders, the entire
country.”
 
Posted at 16:09 PM
Topic: Property Insurance
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