Under a deal announced by federal and state officials on February 9^th, 2012, the nation’s five largest banks – Ally Bank (formerly GMAC), Bank of America, Citi, JPMorgan Chase and Wells Fargo – have agreed with 49 states to settle charges of abusive and negligent foreclosure practices dating back to 2008.

The banks will commit $26 billion to help underwater homeowners and compensate those who lost their homes due to improper foreclosure practices.  Approximately $140 million of this money has been allocated for homeowners in the state of Wisconsin.

Most of the relief will go to those who owe more than their homes are worth, a situation generally referred to as being underwater on a loan.  While the banks have incentives to provide most of the relief over the next 12 months, the settlement allows for relief to be disbursed over the course of the next three years.

Settlement Details

Because of the complexity of the mortgage market and the time line of this agreement, which will be executed over a three-year period, borrowers may not know if they are eligible for relief. Over the next 6 to 9 months, the settlement administrator, the Wisconsin Attorney General’s office, and the mortgage servicers will identify homeowners eligible for the immediate cash payments, principal reductions and refinancing. Those eligible should receive a letter informing them of their status.

Even if you are not contacted, if your loan is serviced by one of the five settling banks, you are encouraged to contact your servicer at the numbers below to see if you are eligible.

Monetary Relief

There are four separate pools of money that will provide relief to Wisconsin residents. The purposes of these four pools have some overlap and more than one pool may be available under certain circumstance.

1) Federal benefits. The first pool of money requires the settling banks to earn “credits” totaling at least $17 billion worth of borrower assistance nationwide. The Wisconsin share of this pool is estimated to be $60 million.

At least 60% of this pool will be allocated to reduce the principal balance of home loans for borrowers who are in default or at risk of default. A reduction in loan principal will provide the borrower with lower payments and give homeowners an opportunity to stay in their homes.

The remainder, will be used for other benefits to homeowners, including facilitation of short sales, unemployed payment forbearance, relocation assistance, waiver of deficiency balances, and remediation of blighted properties.

2) Refinance benefits. The settlement provides $3 billion nationwide, with $31.3 million allocated to Wisconsin, for eligible homeowners who are current on their payments, have a current interest rate of at least 5.25%, but have negative equity (the outstanding loan amount is great than the current market value of the property). The banks will be required to notify eligible homeowners of the availability of these programs and the refinanced rate must reduce monthly payments by at least $100.

3) Payments to borrowers. Borrowers who were foreclosed on after January 1, 2008, lost their homes, and were not properly offered loss mitigation or were otherwise improperly foreclosed on will be eligible for a uniform payment of up to $2000, depending on level of response. Nationwide, $1.5 billion was allocated for this purpose, with $17.2 million designated for Wisconsin. Borrowers who receive payments will not release claims and may seek additional relief in the courts.

4) Payments to states. Participating states will receive $2.5 billion, $31.6 million of which will go to Wisconsin. These funds may be distributed at the discretion of the attorneys general for designated purposes. Permitted purposes include compensation to states for losses resulting from the foreclosure crisis, investigation and prosecution of mortgage fraud and other financial crimes, civil penalties, and foreclosure relief and housing programs such as housing counseling, legal assistance, foreclosure prevention hotlines, foreclosure mediation, and community blight remediation.

Additional Settlement Details

The settlement agreement contains important details regarding the ongoing liability of the banks and new loan servicing standards. Key provisions in these sections include:

Release of Liability 

The banks and their affiliates will be released from civil liability to state attorneys general and bank regulators for past servicing conduct including conduct related to mortgage loan servicing, foreclosure preparation, and mortgage loan origination services. Importantly, the release does not affect the rights of any individuals or entities to pursue their own claims for relief.

Servicing standards

The settlement will require the settling banks to comply with comprehensive “servicing standards” that will significantly reform all aspects of post-closing mortgage servicing.

Among other things, the new standards will:

• prevent robo-signing and other improper foreclosure practices
• require banks to offer loss mitigation alternatives to borrowers before pursuing foreclosure
• increase the transparency of the loss mitigation process
• impose timelines for servicers to respond to borrowers
• restrict the practice of “dual tracking,” where foreclosure is initiated despite the borrower’s engagement in a loss mitigation process.

Consumer Resources

Under the terms of the agreement, the five banks involved with this settlement have set up phone lines to provide consumers with information related to loans that they service. Borrowers may obtain information about the settlement and their rights by calling the following numbers:

• Ally (GMAC): 800-766-4622
• Bank of America: 877-488-7814
• Citi: 866-272-4749
• JPMorgan Chase: 866-372-6901
• Wells Fargo: 800-288-3212

Even if you are not contacted, if your loan is serviced by one of the five settling banks, you are encouraged to contact your servicer at the numbers above to see if you are eligible.

Watch our website for updates on this relief program

The Dane County Foreclosure Prevention Taskforce is monitoring developments related to the settlement agreement to determine exactly how it will impact local at-risk homeowners.  Please watch our website for the latest developments on this relief program.

Local news articles on the mortgage settlement agreement (listed chronologically):

Property Trax: Homeowner advocates blast Walker’s plan to use $26 million from mortgage settlement for state deficit repair  (Wisconsin State Journal – 02/10/2012)

Wisconsin to use part of mortgage settlement for budget  (Wisconsin State Journal – 02/10/2012)

Property Trax: Local advocates warn struggling homeowners not to assume $25 billion settlement with banks will help them  (Wisconsin State Journal – 02/09/2012)

Wisconsin homeowners could get $140 million in foreclosure abuse deal  (Wisconsin State Journal – 02/09/2012)

Who:      For homeowners who have received a Foreclosure Summons and Complaint

When:    11:00 am – 1:00 pm, Thursday, February 16th, 2012

Where:   City-County Building, 3^rd floor, 210 Martin Luther King Jr. Blvd., Madison, WI

Cost:       FREE!

THIS IS A RECURRING EVENT, 1^ST AND 3^RD THURSDAY OF EACH MONTH.

Volunteer lawyers and law students will be available to meet with Dane County homeowners in foreclosure.  Homeowners can receive basic legal information and free help at the Foreclosure Answer Clinic.  Experience shows that homeowners who engage in the court process early have better opportunities for a positive outcome.

Time is of the essence because homeowners generally have only 20 calendar days from the date they receive the initial lawsuit papers to file a formal response. Lawyers and law students at the Clinic can provide homeowners with the information they need to file a response. Homeowners can also find out more about the legal process, the Dane County foreclosure mediation program and other community resources.

The Clinic is open the 1st and 3rd Thursdays of each month from 11:00 a.m. to 1:00 p.m. on the 3rd floor of the City-County Building, 210 Martin Luther King Jr. Blvd, Madison. No appointments are necessary.

Homeowners should bring their Summons and Complaint as well as any other relevant papers about the foreclosure.

The Foreclosure Answer Clinic is a collaborative effort of the Dane County Foreclosure Prevention Taskforce, the Dane County Bar Association and the UW Law School, with grant funding provided by the State Bar of Wisconsin and other support provided by Dane County.

For more information, please contact Dan O’Callaghan (608) 283-0117 or Ellen Bernards (608) 576-8658.

Bilingual Foreclosure Answer Clinic – A FREE Legal Resource – To Be Held in Madison, WI on Thursday, February 16th

Thursday Feb. 9, 2012 6 pm to 8 pm

For any and all homeowners who are looking for help with their mortgage and/or property taxes.

What:                   FREE Workshop – Learn about Loan Modifications and Other Options

Where:                Madison College (MATC) – Madison Truax Campus (near the airport)

3550 Anderson Street, Room 217 (at the top of the escalator)

(Free Parking in the Student Parking Area off Wright Street.)

When:                  Thursday February 9, 2012    6:00 pm to 8:00 pm (may go past 8 pm)

(Please allow time to walk from parking to the class room.)This is a recurring workshop and takes place on the 2^nd Thursday evening of every month.

Call:                      Reservations are appreciated but not required. Please call Bethany Nelson @ (608) 261-5677 for more information

Cost:                     FREE 

Homeowners are rightfully frustrated with the loan modification system and need help to navigate and understand the process. Come and learn how the modification process works, why some homeowners get modifications and others do not, and what other options you might have.

Comments from homeowners attending the workshop:

• “You all got straight to the point”
• “It was very informative and realistic”
• “I appreciated getting legal information on bankruptcy”
• “I appreciated the willingness of presenters to take questions”
• “The workshop helped me identify other resources that may help my situation”
• “They kept it lively”

Presenters: Ellen Bernards, GreenPath Debt Solutions and Co-chair of the Dane County Foreclosure Prevention Taskforce, Attorney Stacia Conneely from Legal Action of Wisconsin, and  Attorney Patricia Hammel, Herrick & Kasdorf, LLP.

The Dane County Foreclosure Prevention Taskforce wants to make sure that homeowners have the information they need to make good decisions and get the assistance they need. We are increasing the number of workshops this year in an effort to reach more homeowners in distress. They will take place every month on the 2^nd Thursday at the Madison College (formerly MATC) Truax Campus beginning February 10, 2011. A special thank you to Madison College for providing free space for these workshops.

The Dane County Foreclosure Prevention Taskforce is a coalition of government agencies, non-profit service providers and other community partners working to implement a coordinated response to the foreclosure problem in Dane County through prevention, intervention, and neighborhood stabilization effort

More information on this program and other services available may be found at www.daneforeclosurehelp.org

PDF: Free Loan Modification and Other Options Workshop

What:               FREE Workshop for Homeowners in Distress

Where:             Madison College (MATC) – Truax Campus (near the airport)

                         3550 Anderson Street, Room 142A, Madison

                         (Free Parking in the Student Parking Area off Wright Street.)

When:               December 8th, 2011    6:00 pm to 8:00 pm (may continue past 8 PM)

                         (Please allow time to walk from parking to the class room.)

Reservations:    Reservations are appreciated but not required.

                         Please call  Bethany Nelson @ (608) 261-5677 to register.

Cost:                 FREE 

Unfortunately, the foreclosure crisis is not over.

Homeowners need to know they are not alone, that there is free help available. We address all of the options homeowners have when they are behind on their mortgage. Our goal is that they leave the workshop with information and a sense that they will survive this difficult time and thrive in the future.

Comments from homeowners attending the workshop:

“You all got straight to the point”

“It was very informative and realistic”

“I appreciated getting legal information on bankruptcy, having people presenting from different angles, and the speed, content and understandability”

“I appreciated the willingness of presenters to take questions”

“It was very clear with difficult topics”

 ”The workshop helped me identify other resources that may help my situation”

“They kept it lively”

Presenters: Ellen Bernards, GreenPath Debt Solutions and Co-chair of the Dane County Foreclosure Prevention Taskforce Attorney Stacia Conneely from Legal Action of Wisconsin and  Attorney Patricia Hammel, Herrick & Kasdorf, LLP.

The Dane County Foreclosure Prevention Taskforce wants to make sure that homeowners have the information they need to make good decisions and get the assistance they need. We are increasing the number of workshops this year in an effort to reach more homeowners in distress. They will take place every month on the 2^nd Thursday at the Madison College (formerly MATC) Truax Campus beginning February 10, 2011. A special thank you to Madison College for providing free space for these workshops.

The Dane County Foreclosure Prevention Taskforce is a coalition of government agencies, non-profit service providers and other community partners working to implement a coordinated response to the foreclosure problem in Dane County through prevention, intervention, and neighborhood stabilization effort.