How Does The Foreclosure Fraud Settlement Affect Illinois Homeowners?

On February 9, 2012, the Attorneys General of 49 states and the United States announced a settlement with Bank of America, Wells Fargo, JP Morgan Chase, Citibank, and Ally/GMAC. The settlement is meant to resolve some of the issues presented in the robosigning scandal, which broke in 2010.

There are plenty of opinions as to whether the settlement is a win for consumers or banks. However, until the actual settlement documents are filed in federal court, there are very few specific details available. In fact, the rumor on the street is that there are no official terms to release at this time. The official terms will eventually be released on the settlement's website. The website is oddly not a .gov website, which has caused some observers to raise their eyebrows.

Illinois Attorney General Lisa Madigan has also published her own website that contains resources related to the settlement.

Here is what we know so far:

If your loan is held by Fannie Mae or Freddie Mac, you are not eligible for any of the settlement's benefits. Edward DeMarco, Jr., the acting director of the Federal Housing Finance Agency, refused to include Fannie and Freddie in the settlement. He cited concerns regarding the obligation to write down the principal balance on loans. He argues that writing down the principal balances on Freddie and Fannie-held loans would cost American taxpayers $100 billion. His numbers are actually off the mark -- principal reductions would prevent countless defaults, which will cost taxpayers even more money. In a typical foreclosure sale, banks will under-bid the property's value to cover the cost of owning and re-selling the property. This means that most foreclosure sales are currently netting values that are less than the current market value of the home.

If you mortgage is or was held by one of the five participating banks, however, you may be eligible for relief.

For example, if your home was foreclosed upon between January 1, 2008 and December 31, 2011 by Bank of America, Wells Fargo, Chase, CitiGroup, or GMAC/Ally, you may be contacted by the Attorney General's Office through a settlement adminsitrator. You can also directly contact the Illinois Attorney General's Office by calling its Homeowner Hotline at 1-866-544-7151. Realistically, this amount is likely to be about $2,000 per home.

If your home is underwater, and you are behind on your mortgage, or are at risk of defaulting, you may be able to obtain a principal reduction on your first or second mortgage. Illinois is supposed to receive $1 billion that is specifically earmarked for payments to borrowers, and to those who already lost their homes. The Illinois Attorney General's Office has stated that it will not divert any of the $1 billion into the State's general fund (which both Wisconsin and Missouri are doing).

If you are seeking a principal reduction or other help, you can call the Illinois Attorney General's Homeowner Hotling at 1-866-544-7151. You can also contact your mortgage servicer at the numbers below:

  • Bank of America: 1-877-488-7814
  • Chase: 1-866-372-6901
  • Ally/GMAC: 1-800-766-4622
  • Wells Fargo: 1-800-288-3212
  • CitiGroup: 1-866-272-4749

If you are current on your mortgage, but are underwater and want to refinance your loan, you can contact your servicer at the numbers above or contact the Illinois Attorney General's Office Homeowner Hotline. In order to qualify for a refinance loan, your interest rate must be higher than 5.25% and you must have been current on your payments for the last 12 months.

As more details are released, more information will be available. Given that Illinois is receiving $1 billion of the overall settlement gives me some hope that we'll see some positive change for Illinois homeowners who are underwater or facing foreclosure.

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