The new mortgage settlement: What's in it for you?
Five major banks and 49 states have finally struck a $26 billion deal.
It has ambitious goals: to right some of the wrongs from the foreclosure mess, to help stabilize the housing market, and to prevent more abuses and problems in the future.
But we have a sinking feeling that this settlement will do a lot more for the banks than it will the millions of families who have lost their homes to foreclosure or seen the value of their homes collapse.
Let's take just a second to remember what's going on here.
The five banks are entering into this deal with the top prosecutors from all but one state to end a nationwide investigation of abusive foreclosure practices in which the banks used improperly prepared and reviewed documents to literally throw people out of their homes.
In exchange for committing to provide their borrowers with $26 billion worth of mortgage relief, the banks get to avoid criminal prosecution and move past all of the sordid "robo-signing" business.
Move on to what? Well, foreclosing on more homes, of course.
But could you be one of the lucky borrowers who still owns a home, or lost one to foreclosure, and stands to benefit from some of that money?
At this point, it's almost easier to tell whether you won't qualify for a cut than determining who will.
First of all, you won't qualify if your loan isn't -- or wasn't -- serviced by one of the five participating banks. That's Ally/GMAC, Bank of America, Citi, JPMorgan Chase and Wells Fargo.
Your loan servicer is the place you send, or sent, your mortgage payment. If it's not on this list, you're not covered.
And if you live in Oklahoma, you're out. It was the only state that didn't sign onto the deal.
Most of the money will be divvied up among three types of aid.
You could receive $1,500 to $2,000 if you were foreclosed on and there's evidence that the bank played fast and loose in seizing your property.
But your home must have been foreclosed on between Jan. 1, 2008, and Dec. 31, 2011, and not everyone who lost a home will be receiving a check.
It will take two to three months to choose an administrator to run the program, and then another six to nine months working with the banks and government lawyers to identify who qualifies for a check.
You'll be notified if you're eligible to file a claim, and accepting the money doesn't mean you can't sue the bank for damages yourself.
The biggest chunk of the settlement, about $17 billion, will be used to reduce the debt for about 1 million underwater homeowners on the verge of foreclosure.
One out of every five Americans with a mortgage owes more than their properties are currently worth -- an average of about $50,000 more.
To qualify for principal reduction, a homeowner must not only be underwater but behind on their payments or at "imminent risk" of default.
The loan modifications are intended to help homeowners with first mortgages or with both first and second mortgages on their homes.
But your primary mortgage can't be owned by Fannie Mae or Freddie Mac -- the big government-owned companies that provide most of the money for home loans in this country. To find out if that's the case, go to:
Fannie Mae website or call 800-7FANNIE, 8 a.m. to 8 p.m. ET.
Freddie Mac website or call 800-FREDDIE from 8 a.m. to 8 p.m. ET.
Ultimately, the banks will decide who will be offered principal reduction.
As a result, we expect most of the loans selected will be ones the banks own, although some borrowers whose loans were bundled and sold to investors could benefit.
It's another case of they'll be in touch -- or not.
And finally, the banks are supposed to spend about $3 billion refinancing about 750,000 underwater borrowers who are current on their payments into new, lower-interest loans.
Once again, your mortgage can't be owned by Fannie or Freddie.
If it is, the government's recently improved Home Affordable Refinance Program (HARP) is for you instead.
Loans owned by private investors aren't eligible for refinancing either. Only those held by one of the banks involved in the settlement will qualify.
They'll choose who will ultimately benefit.
Do you see a pattern here?
That’s one of the reasons we're pretty skeptical about this settlement.
Lenders have been incompetent and uninterested in holding up their end of every deal and settlement they've reached with the government since the housing crisis exploded in 2008.
That's why every foreclosure prevention plan or courthouse agreement reached over the past four years, starting with George Bush's HOPE for Homeowners, has helped only a fraction of the homeowners it was intended to reach.
They have up to three years to fulfill their commitment and complete their principal reductions and refinancings.
We wouldn't be waiting by the phone.
What about people who lost the equity in their homes but don't qualify for specific relief in this deal? Is there anything in it for them?
If this settlement succeeds in its goals of minimizing foreclosures and stabilizing local real estate markets, it's hoped that it will eventually benefit homeowners everywhere.
Every foreclosed home creates a ripple effect in the neighborhood that depresses home values, cuts into the tax base and, by sitting empty and untended, can help demoralize and even increase crime in the surrounding area.
Not everyone in the real estate business is convinced, however.
"The only thing that will stabilize the market is time," says Paul McFadden, a loan officer with the Legacy Group in Bellevue, Wash.
"My thoughts are, there is still too much uncertainty worldwide. The bottom line is, until most of the distressed properties are sold and unemployment comes down, it’s going to be dicey. Check back with me in 2014."