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Washington State Attorney General Rob McKenna last week announced a $25 billion national mortgage settlement with five of the nation’s largest banks – the largest consumer settlement in history.National_mortgage_settlement_pie_chart

David Huey, senior counsel with state Attorney General’s consumer protection division – one of the lead state negotiators in the settlement — answered questions about the settlement this week during a live chat with The Seattle Times. Huey was joined by Marc Cote, program director of the Washington Homeownership Resource Center and Parkview Services, and Seattle Times reporter Sanjay Bhatt. Some of these questions and answers might be relevant to your situation. Here are some highlights:

Jeremy: My loan originated with Chase in 2007, and the servicing was subsequently passed off/sold to a new Servicer who is not part of the settlement. Would I be able to get a refinance with Chase in this case as part of the settlement, even though they are not  currently the servicer of the loan? I am current on my mortgage, but slightly underwater. Thanks in advance! 

Huey: Jeremy-Technically, because your loan was passed off, it does not qualify for the settlement. But I would encourage your to go ahead and ask them. Wait a couple of months until the settlement rush has gone down.

Seth: Does the settlement apply to non-traditional bank lenders like credit unions?

Huey: No, it only applies to the five banks. It will [be] extended to another nine, but it will not be extended to local financial institutions, such as credit unions or community banks. They were not part of the problems addressed in the settlement.

Aonya: The mortgage settlement only provides relief to homeowners whose notes are actually owned by one of the five major banks. What in the settlement prevents banks from selling off the notes they own into mortgage backed securities and making homeowners ineligible for relief?

Huey: Aonya - The settlement provides that if any of the banks sell loans that they are servicing, they must include language in the sale agreement that obligates the buyer to perform the bank's settlement obligations. One more thought: Even if they sell the loan, they have to meet their financial targets of $25 billion. That target is so high, they will likely need all the loans they own in order to meet it. So there is no incentive, and in fact a disincentive, to selling off loans.

Dave B.: I have a loan with Chase who is the servicer but the owner of the paper is Freddie Mac what are my options?

Huey: Dave B. - You need to contact Freddie Mac. If you are dissatisfied with your experience with Freddie Mac, you should contact your representatives in Congress. Freddie and Fannie are both being supervised by an interim director. The Senate needs to confirm a permanent director.

Danielle: Im confused about the difference between the servicer and the note holder. My servicer is Americas Servicing company, which is owned by Wells Fargo. Will I be eligible for help?

Huey: Danielle - Yes, loans owned by Wells Fargo are eligible for the settlement. It is my understanding that "America's Servicing Company" is just a business name for Wells Fargo.

Chad: Seems like responsible homeowners who are completely underwater, but still making their payments, aren't helped in any way, or have the most difficult time -- while individuals who have made poor decisions get all the help and assistance. Do we responsible homeowners get any breaks in these latest settlements?

Huey: We included $3 billion in relief just for responsible homeowners who are underwater. If you are underwater and current on a non-jumbo loan owned by one of the defendant banks, you will receive an offer to refinance at a lower interest rate.

Chad: Thank you for answering my question -- when can we expect an offer to refinance at a lower interest rate? Will this info be coming from the State, or from my lender, Bank of America?

Huey: Chad - Your offer will come from the bank. I can only guess at how soon they will get to it. I would expect within the next 6-9 months. We built in financial incentives to do as much as of the consumer relief as possible in the first year. However, the settlement goes on for three years.

Chad: This has been really helpful, thank you for doing this. Last question - my loan is currently back by Freddie Mae. Am I still eligible? Do you have a website, or reference, where we can find more information online?

Huey: Chad - Go to nationalmortgagesettlement.com. That site is run by the states who led negotiations. Be aware of imitators.

Sanjay Bhatt: So about half of our readers on this live chat say the mortgage settlement isn't fair..[a]nd 56 percent say it won't stop home prices from declining.

Huey: Sanjay - The settlement releases the banks for the conduct that was investigated and which they agreed to a remedy. There would be no settlement without this. The settlement does not release the banks for conduct outside the settlement. For example, it does not release the banks for securities violations. It does not release the banks from criminal liability. It does not release the banks from liability to individuals. It only releases the claims of state attorneys general and state banking regulators for foreclosure, servicing and robo-signing-related issues. The states believe that the $25 billion settlement is warranted by the size of the problems addressed. That amount represents the largest consumer settlement in history. In Washington, it is unlikely that the Attorney General will pursue criminal prosecutions because, under Washington law, the AG does not have primary criminal jurisdiction. It is very likely that the federal government and other states will pursue criminal charges.

Guest: Great. A follow up question: After nearly suing wells fargo to comply with the terms of the HAMP trial modification that we completed, they did finally modify our loan, under those terms. So we now have 2% for 5 years, and then it goes up every year by a percent until it fixes at 5%. We are happy with this loan mod. However, our house is worth 220k, and we owe 430k. Are we still likely to be positively affected by this settlement?

Huey: Based upon the facts you provided in your question, it appears that you may qualify for some relief. You should contact Wells Fargo. However, you should also be patient because the banks are struggling to deal with the volume of email and phone calls they are receiving at present.

VC: I was able to get my interest rate lowered last year, but my home is still underwater. I thought a modification meant they re-assessed the value of your house. So I wouldn't call that a modification.

Huey: VC - "Modification" in the context of a mortgage loan modification means a modification of any of the terms of the mortgage. Obviously, that means there can be good modifications and bad, but both are, technically speaking, modifications. Having said that, in my experience, modifications are much better today than they were a couple of years ago--in part because of Attorney General McKenna's efforts.

Guest: Reply from guest at 11;48!: Do we need to contact WF to receive any benefit we're eligible for, or will they contact us?

Huey: We received commitments from all the banks to aggressively market the settlement to eligible borrowers. So I would expect that Wells Fargo would be contacting you at some time in the future. However, there is certainly nothing to prevent you from calling them first.

Sanjay Bhatt: Dave, does it cost people anything to get the $2,000 check for wrongful foreclosure?

Huey: The answer is a resounding NO. If anyone tells you otherwise, or attempts to get you to pay them money for assistance with the settlement, they are scamming you. We received a report from another state that scammers are calling people, telling them they qualify, and asking for bank account and routing numbers. Don't fall for it!

For more information about the national mortgage settlement go to www.Nationalmortgagesettlement.com or www.atg.wa.gov/nationalmortgagesettlement.aspx. Visit http://goo.gl/Ykz1Z to find the link to The Seattle Times article. 

-Sophia Reza-