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Updates on the National Mortgage Settlement


Early in 2012, five banks agreed to a $25 billion mortgage settlement after being accused of a number of improprieties resulting in the nationwide foreclosure crisis, including failing to negotiate in good faith with homeowners. The settlement funds were intended to help troubled homeowners via principal reductions, short sales and lower interest rates. Some individuals who already lost their homes to foreclosure in Illinois were also supposed to receive small amounts of compensation from the settlement funds.

It has now been reported that the banks have fulfilled about 80 percent of their obligations under the settlement, but fewer homeowners than expected have received mortgage assistance.

Officials had estimated that 1 million borrowers would experience some sort of mortgage relief as a result of the settlement, but only 650,000 borrowers have received aid thus far.

And, unfortunately, there are numerous reports of banks continuing to use abusive strategies to collect debts and foreclose homes. For example, a federal judge recently sanctioned Bank of America for continuing to harass a couple over a home loan that they no longer owed.

After the couple discharged a home loan in Chapter 7 bankruptcy, Bank of America reportedly continued to contact them to get them to pay the debt. After a debt is discharged in bankruptcy, creditors may no longer try to collect it. A judge ordered the bank to pay $10,000 a month for every month it contacts the couple about the debt, as well as the couple's attorney's fees.

These reports are reminders that although the housing market is recovering, it is still tough out there for consumers. Those who are struggling with creditor disputes or overwhelming debts in Illinois need to be aware of their rights in order to protect them. When consumers seek knowledge and legal counsel, it is often possible to defend foreclosure, stop creditor harassment and obtain debt relief.

Source: New York Times, " Settlement Report Finds Banks Giving Timely Mortgage Relief," Shaila Dewan, Oct. 16, 2013

Source: The Bankruptcy Beat, "Bankruptcy Judge Sends a Message to Bank of America," Peg Brickley, Oct. 4, 2013