For the better part of a year, banks and each state's attorney general have been negotiating a settlement on behalf of homeowners who may have had their house taken through foreclosure fraud.
Many news articles have looked at how homeowners' rights were violated as banks used robo-signing practices, in which banks paid companies to authorize documents they had never seen and didn't know to be accurate, as well as made-up documentation and also shady tactics to try to unlawfully seize people's homes.
As punishment, the nation's five largest banks agreed to pay $5 billion in cash plus $17 billion over three years toward current mortgages in a large-scale settlement that all but one state agreed to. As analysts point out, however, this money is unlikely to trickle down to do any real good to the homeowners who were affected. By now, they have lost their homes, so a one-time check in a low amount isn't going to help much.
In fact, one of the best ways to defend against a foreclosure is bankruptcy in Los Angeles. When a homeowner files for bankruptcy, they get what's called an automatic stay. This allows them to get immediate protection from a bankruptcy proceeding.
Los Angeles bankruptcy lawyers know that this means a person can keep their home even if the bank is in the process of trying to foreclose. What this protection does is allows a person to drop other forms of debt so they can continue making payments on their home.
If they have decided that the home is a liability because the homeowner is underwater on their mortgage, bankruptcy in Los Angeles can help a person get out from underneath their home as part of a strategic default. In either scenario, bankruptcy can provide protection while these important decisions are made.
According to The New York Times, Bank of America, Wells Fargo, Ally Financial, JPMorgan Chase and Citibank agreed to pay $5 billion in cash. They will also attempt to help homeowners who are underwater on their mortgages by reducing principal owed by $17 billion over three years. Borrowers may qualify for $3 billion in refinancing and those who faced improper foreclosure will get $1.5 billion, which will work out to about $2,000 a person.
Many critics agree this settlement won't do much to either restore confidence in lenders or help fix the woeful housing market. While the government and banks tried to tout this as a major deal that will have big benefits to consumers, critics point to the $700 billion in underwater mortgages and compare it to the $17 billion that will go toward fixing it.
The Times article points out another issue with the settlement -- how it will be policed. Other settlements and government programs have looked good on paper, but failed to deliver results for homeowners. It's unclear how the government intends to dole out money and make sure banks are actually doing what they agreed to do.
The Nader Law Firm will provide a free consultation to help guide you in making a decision that works for you. In Encino, Glendale and Los Angeles, just call 1-800-568-0707.
More Blog Entries:
Deal Is Done, but Hold the Applause, by Gretchen Morgenson, The New York Times