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Mortgage Fraud Settlement Terms “Satisfied,” With Unsatisfying Results

You may recall two years ago that representatives of the five largest banking institutions shook hands with government leaders from 49 states in a $25 billion settlement that stemmed from widespread mortgage fraud.

The deal was supposed to result in $5 billion going directly to struggling homeowners and the other $20 billion was to be offered in other “homeowner relief actions,” such as mortgage loan modifications that would keep underwater borrowers in their homes.

Now, according to the Final Credit Report issued by the National Mortgage Settlement Monitor, Joseph A. Smith Jr., the terms of the settlement have been “satisfied.” The results, as our Miami foreclosure lawyers see it, are thoroughly unsatisfying. Not only has the settlement failed in its core mission of rescuing homeowners left drowning in debt by the banks, but it has also failed miserably in serving as a deterrent against future abuses by these financial giants.

Let’s start with the raw numbers first.

When the settlement was first announced back in 2012, officials with the U.S. Department of Housing and Urban Development speculated that it would benefit as many as 2 million homeowners. Granted, that was on the high end, and those who were being realistic put the figure at closer to half that.

The announcement by Smith’s office now says that a total of more than 600,000 separate homeowners were helped. This was less than two-thirds of what was believed to be the low-end estimate of people who would get to hang onto their homes. However, it might have still been deemed significant – were it not for the fact that the actual number of people who got to stay in their homes was closer to 84,000.

Smith says that more than 631,500 total mortgages benefited from bank relief actions, with Bank of America by far providing the most relief, aiding some 317,000 separate loans with more than $27 billion worth of relief actions. Now, take into account the fact that less than a third of that $27 billion actually qualified as “homeowner relief” under the exact terms of the settlement.

Even so, “homeowner relief” was defined so broadly under the settlement terms that Smith is able to get away with overstating how many people were actually helped. In fact, the vast majority of “relief” offered by BofA (about 219,000 loans) involved second-mortgage lien modifications – which did little to keep people in their homes. Additionally, about 40,000 homeowners received “relief” in the form of transitional funds, which was basically a check to help them find somewhere else to stay. Many times, these amounts were pittance, so small that a large number of people didn’t even bother to cash them.

Other banks’ payouts followed similar guidelines.

Now let’s explore the greater goal of the settlement, which was to compel banks not to abuse homeowners. But in fact, these same firms continue to violate the settlement terms. The National Mortgage Settlement oversight agency received 60,000 complaints of violations just in the course of six months. Despite promises to do better, the banks continue to mislead, bully or just outright ignore the borrowers they are supposed to be helping.

If you’re battling foreclosure in Miami or the surrounding areas contact Jacobs Legal for a confidential appointment to discuss your rights. Call (305) 358-7991. Also, don’t miss Miami Foreclosure Attorney Bruce Jacobs on 880AM/the Biz, every Wednesday from 5 p.m. to 6 p.m. on “Debt Warriors with Bruce Jacobs,” discussing foreclosure topics that matter to YOU.

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