Probably nothing, yet. But it does provide some hope for a large number of Illinois residents who owe more than their mortgage is currently worth.
Last week, Illinois joined several other states in a $25 billion settlement with five leading lenders: Bank of America, JPMorgan Chase, Wells Fargo, Citibank and Ally Bank, formerly GMAC. Illinois is expected to receive $1 billion from the settlement. While the details of the settlement are still being finalized, the tone from the Illinois Attorney General Lisa Madigan's office was positive.
“After many months of investigation and negotiation, I’ve concluded that this settlement accomplishes two major goals: it provides timely help for struggling homeowners, and it establishes new rules for mortgage servicing that will protect homeowners in the future,” Madigan said in a press release. “While the settlement is a big step forward in our efforts, it is not the end. In Illinois, we will continue to take strong legal action against lenders, banks, servicers and others who contributed to the housing and economic collapse.”
Madigan has indeed been at the forefront of taking banks to task for unethical practices, including what's become known as robo-signing, or unverified signatures on bank documents required during the foreclosure process. This $25 billion settlement is a result of robo-signing.
So what does it mean for homeowners? Today, not much. I contacted the Attorney General's Office Homeowners Helpline at (866) 544-7151, which is currently taking names and phone numbers of under-water homeowners, with a goal of responding within a week. As you can expect, the phone at the office is constantly ringing.
However, the time it takes for the terms of the settlement to take effect will likely frustrate homeowners. A representative from the Office indicated it could take three months before lender requirements will be met. Other estimates for finalizing the terms of the settlement are as long as three years. The new lender requirements, according to the Illinois Attorney General's Office, include the following:
- Distressed home borrowers will be considered for a loan modification rather than being automatically referred to foreclosure.
- No loan will be referred to foreclosure while a loan modification is being considered.
- Borrowers will be allowed to appeal a denial of a loan modification.
- Mortgage servicers must provide a single point of contact for borrowers as well as easier methods for checking on the progress of their loan modification applications.
- Loan servicers will be held to strict timelines in dealing with distressed borrowers
Obviously, these are ambitious goals. In particular, delaying foreclosure while a loan modification is taking place could easily halt most foreclosure proceedings. Additionally, skeptics already are suggesting that this could be considered a "stealth bank bailout."
So for today, the settlement won't make much difference to a homeowner facing foreclosure. But the coming months will determine whether this windfall will truly help Illinois residents, and to what extent.
For more information about the settlement, call the Homeowner Helpline at (866) 544-7151, or visit www.illinoisattorneygeneral.gov/consumers/bankforeclosuresettlement.html or www.NationalForeclosureSettlement.com.