Tess Vigeland: We need to explore a legal settlement involving the nation's five biggest banks and attorneys general from nearly all of our 50 states. This is about that so-called robosigning scandal, when banks rubber-stamped some of the paperwork involved in foreclosures. Many people were pushed into default on their home loans because of that shoddy paperwork, some even lost their houses.
It's a $25 billion agreement and Marketplace's Adrienne Hill is here with the details. Hello!
Adriene Hill: Hey Tess.
Vigeland: So $25 billion, huh? Who's gonna get a piece of that action?
Hill: Well, there are a couple of groups of people this is gonna help. The firs is people who owe more than their home is worth and are way behind on their payments. So people may be even near default. The banks have set aside billions of dollars in this settlement to reduce the loan principal for these borrowers in an effort to keep them in their home. They could be getting somewhere in the neighborhood of $20,000 in principal reduction.
Borrowers who are current on their mortgage, but also underwater will be helped out. That's gonna come in the form of refinancing their mortgages. And then some of the settlement money is gonna go to people who were foreclosed on between 2008 and the end of last year. And they could get around $2,000 each, depending on how many people actually qualify for the money.
Vigeland: $2,000, when you've lost your home?
Hill: $2,000 when you've lost your home.
Vigeland: All right, well, who misses out on this deal then?
Hill: Well it turns out the state of Oklahoma struck its own agreement, so Sooners won't be a part of this settlement I'm talking about. But the fact is, actually, that the vast majority mortgage holders aren't gonna benefit from this.
Vigeland: Why is that?
Hill: Well, loans owned by Freddie Mac and Fannie Mae aren't included in the settlement -- and they own most of the mortgages in the country. So the settlement is only for people whose mortgage is serviced by Ally Financial, Bank of America, Citigroup, JPMorgan Chase and Wells Fargo -- and again, not owned by Freddie Mac and Fannie Mae.
Vigeland: This sounds awfully complicated.
Hill: It is. But if you don't know who owns your loan, I've posted some information and links on our website to help you figure that out. And of course, a mortgage servicer, that's the company that you actually write your check to every month.
Vigeland: Assuming that your mortgage was serviced by one of these banks and you don't live in Oklahoma -- how do you know if you qualify for relief?
Hill: Well, you don't yet. It's a complicated agreement, it's going to take about three years to fully get done. So some people it's just not quite clear exactly who's eligible and who's not. The settlement group says people who are affected, who are eligible for relief will be contacted directly. But if you need more information, you can call the banks.
Vigeland: But wait a minute! If you lost your home, how are they gonna know where to send the letter?
Hill: They're asking people who were foreclosed on or people who just might not be easy to locate right now to contact their state attorney general. And so I've posted all that information on our website also.
Vigeland: If you are one of the folks who benefits from the deal, when do you start seeing some of the upside here?
Hill: Not tomorrow. Over the next month or so, the settlement negotiators are going to try to decide who will handle the details of the settlement. Once that's done, they're going to start identifying the home owners or former home owners who might be eligible for refinance, principal reduction or this cash pay out. And they're going to send those people letters. Right now, those letters are expected to go out in the next six to nine months as I understand it. But again, the settlement could take as long as three years, start to finish.
Vigeland: Marketplace's Adriene Hill. Thanks for the explanation and we'll see you on the web.
Hill: Yes, thank you.