The $50 billion National Mortgage Settlement (NMS) between the U.S. government and 49 states and five large banks was good news for some homeowners who were erroneously foreclosed on and evicted from their homes. Although homeowners only received $20 billion out of the agreement, some of the money was applied to principal reductions on underwater mortgages, relief like short sales and deeds in lieu of foreclosure, and refinancing. At least, this is the good news that comes out of final crediting report by the NMS’s court-appointed monitor, as reported by The Washington Post. Unfortunately, the $20 billion in benefits provided little for the millions of homeowners who still owe more on their mortgages than their houses are worth. For them, bankruptcy might be better than hoping that a negotiated settlement will provide them relief.
But first, some background on what the NMS has accomplished for 630,000 loans:
- $7.5 billion went to principal forgiveness on a primary lien.
- $3.1 billion did so for second liens.
- $6.4 billion went to “other relief” (short sales, deeds in lieu).
- $3.6 billion helped refinance mortgages.
Another $5 billion went to state governments and to people who wrongly lost their homes.
So far so good, except that as of third quarter 2013, 6.4 million homes were still in negative equity according to CoreLogic. Moreover, the aggregate amount of underwater mortgages was $397 billion, a universe away from the $10 billion that the NMS gave to homeowners in principal relief. The good news is that neither New York State nor New York City was in CoreLogic’s top five rankings for underwater homes by state and city, respectively. Also, with home prices rising, many homeowners are escaping negative equity by fortune.
On its own, this doesn’t mean that New Yorkers are in good shape. Many homes might be in foreclosure nonetheless. If you are having problems making your mortgage payments, then you will be better off discussing your situation with an experienced New York bankruptcy lawyer rather than waiting for the market to improve your house’s value.
You certainly shouldn’t expect the banks to agree to cut any of your principal obligations.
For answers to more questions about mortgage debt, bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced fair debt collection practices act Bruce Weiner for a free initial consultation.
