Foreclosure settlement: Fla. to get $8.4 billion

TALLAHASSEE, Fla. – Feb. 10, 2012 – Florida homeowners and foreclosure victims will receive almost one-third of the $8.4 billion mortgage settlement announced yesterday. The settlement amount is second only to California.“This settlement will provide substantial relief to struggling Florida homeowners, and ensures that our state gets its fair share of the relief being provided nationally,” says Florida Attorney General Pam Bondi.

According to Bondi, most of the money will go to current homeowners who are underwater – who owe more on a mortgage than their home’s current worth – in the form of principal reductions and/or converting their mortgage interest rate to lower levels. About $170 million will go to homeowners who lost their home in foreclosure.

The settlement applies to clients or past clients of five of the nation’s biggest banks: Bank of America, Wells Fargo, JPMorgan Chase, Citigroup and Ally Financial. Other banks may also sign on, though they have not been named.

Negotiations are ongoing. The settlement does not apply to loans held by Fannie Mae and Freddie Mac.

Settlement details

Relief won’t be immediate. While the agreement calls for immediate principal reductions for first and second liens, it will take up to two months for negotiators to select an administrator to handle the logistics, up to nine months to identify eligible homeowners and contact them by mail, and up to three years to complete the process.

Underwater homeowners get relief. The agreement calls for Floridians to receive $7.6 billion from banks to pay for refinancing relief, including principal reductions; borrowers with higher interest rates will also be able to refinance at 5.25 percent. While banks will handle the disbursements, state Attorneys General will oversee the process.

Foreclosed owners get cash. Ex-homeowners who lost a home within the past three years will receive about $2,000 each even if their foreclosure did not involve allegations of robo-signing. Critics, however, say that amount is far too low to compensate for their suffering.

Foreclosures could increase. “The immediate results are not going to be all that pleasant,” predicts Mark Vitner, an economist with Wells Fargo. “The amount of foreclosures will actually increase and there will be some additional downward pressure on home prices.” Some homeowners have lived in a home over two years as the foreclosure process crawls through Florida’s legal system. Analysts, such as Vitner, believe the just-announced settlement brings clarity to the process and banks will proceed more quickly to take back homes.

Florida oversight grows stronger. The state will collect $350 million from the settlement to pay for foreclosure prevention programs and to protect consumers.

A new website includes settlement documents, a set of frequently asked questions, breaking information, and addresses for the banks involved in the settlement. If you’re managing a website as well, and you need assistance about its design, look for Salterra Web Design in Arizona. It also includes links to Fannie Mae and Freddie Mac so homeowners can find out if their mortgage is included in the settlement. For more information, go to NationalMortageSettlement.com.