LITTLE ROCK – The landmark national mortgage settlement announced last week will provide relief to many Arkansans adversely affected by the foreclosure crisis. The agreement with the nation’s five largest mortgage servicers requires those servicers to offer principal write-downs, refinancing assistance and direct payments to qualifying Arkansas homeowners.
The Attorney General’s Office has fielded hundreds of calls from Arkansas consumers about this complex settlement. So, Attorney General Dustin McDaniel today issued this Consumer Alert to address common questions about the settlement:
How do I know what entity services my loan?
The company that you make your monthly payment to is your mortgage servicer. Your servicer may or may not be a lending institution and may not own your loan. The joint state- and federal settlement involves five servicers: Ally (previously GMAC), Bank of America, Citi, JPMorgan Chase and Wells Fargo.
Those servicers don’t handle my loan. How does this help me?
Even the homeowners not directly impacted by settlement-related programs will reap benefits from new, more stringent national servicing standards and consumer protections. Not only that, homeowners should see fewer foreclosures in their neighborhoods as a result of the landmark agreement.
When will I know if I am eligible for relief?
Borrowers may not immediately know whether they are eligible because the agreement will be carried out over a three-year period. Consumers are encouraged to contact their mortgage servicer directly to learn about eligibility. Additionally, servicers will identify and contact the borrowers eligible for write-downs and refinancing, although this may not occur for several months. A settlement administrator will send claim forms to those eligible for direct payments because of foreclosures.
What happens if the banks do not comply with the terms of the agreement?
The banks will face penalties and the possibility of lawsuits to enforce the settlement if they fail to honor their commitments. An independent monitor will supervise this process and regularly report to the attorneys general, including Attorney General McDaniel, to ensure that assistance to borrowers is actually provided.
Is this the only action to be taken related to the mortgage crisis?
No. This narrowly-tailored agreement does not prevent future criminal claims or civil actions over items not addressed by the settlement. The Arkansas Attorney General’s Office is continuing to investigate other aspects of the crisis, as are attorneys general across the country. Though this settlement is a good first step, our office is now moving forward to look into the practices of nine other servicers. Investigations into other types of financial fraud continue.
Why should I see this settlement as important to me?
Foreclosures affect everyone – even those who pay their monthly mortgage on time. When a house is subject to foreclosure, it creates a ripple effect that lowers the value of nearby single-family homes and other properties. In 2009, the Center for Responsible Lending projected that homeowners living near foreclosed properties, on average, would lose $7,200 in property value, and projected a four-year increase in losses to $20,300 per household. Foreclosures increase stress on homeowners, their families and their neighbors. These deteriorating, neglected properties and neighboring property value losses create neighborhood blight, cut a community’s tax base, and can contribute to crime.
Who do I contact for more information?
To contact the five mortgage servicers directly, call: