National Association of Consumer Bankruptcy Attorney's Addresses Firm At 20th Annual Convention

On April 28, 2012 in San Antonio at the National Association of Consumer Bankruptcy Attorney's ("NACBA") 20th annual convention Joseph A. Smith, Esq., head of the National Mortgage Settlement Monitor, addressed us. Five banks and mortgage servicers (Ally/GMAC, Bank of America, Citi, JPMorgan Chase and Wells Fargo) reached agreement on a mortgage settlement which is suppose to provide at least $25 billion in consumer relief.

The funds will be used as follows:

  • At least $17 billion in principal reduction and loan modification for homeowners who are in trouble and need help to avoid foreclosure.
  • Up to $3 billion in refinancing for "underwater" homeowners who are current on their mortgages but owe more than their homes' current market value.
  • $1.5 billion in payments to homeowners who lost their homes to foreclosure between Jan. 1, 2008 and Dec. 31, 2011. These recipients will have to complete a simple form, and they will not have to drop any legal claims they may have.

Payments to the 49 signing states include efforts to support the prevention of foreclosure as well as consumer protection and education programs, and for civil penalties.

The settlement also creates the Monitor whose job is to oversee the servicers and ensure their compliance with the consent judgment. The role of the Monitor is to ensure that the banks comply with the servicing standards and consumer relief requirements outlined in the National Mortgage Settlement.

According to the New York Attorney General's web site:

"Under the Loan Modification Program, servicer banks get credit from selecting options from a menu that in­cludes 1st and 2nd lien principal reductions, short sales, elimination of deficiency accounts (back due payments), cash-for-keys, unemploy­ment forbearance, and a neighborhood stabiliza­tion program. A total of $495 million in benefits are expected to flow to borrowers under this program. An estimated 21,000 New Yorkers may qualify for principal reductions (1st and/or 2nd liens)."

The problem is the AG settlement is so complex that it is not very well understood. The NY AG's web site basically says, you will be contacted.

In discussing attempting to get some relief for one of my clients pursuant to the AG Settlement the attorney representing the bank said that it is very complex and it is not clear how it is going to apply to individual situations.

The Monitor advised us that there was no application available as of yet (April 28, 2012); and I see no change since then. Meanwhile homeowners still must ardently battle the banks in order to keep their homes. It makes no sense to foreclose and take over a house in a depressed neighborhood where the homeowner is willing and able to make current mortgage payments; despite the amount of arrears there may be.