In 2012, five of the nation’s biggest banks reached an agreement with state and Federal officials that addressed the foreclosure abuses over the last several years. The banks agreed to give roughly 46 billion dollars in relief to distressed homeowners, much of it through principal reductions of mortgage amounts. What the banks did with this mandate is proving worthless. Here’s why.
Despite these banner numbers, much of this relief is coming in the form of reducing principal on second mortgages, not on first mortgages. While addressing the second mortgage can offer some relief, it is the primary mortgage that leads to the foreclosure lawsuit. That means homeowners are still in jeopardy of losing their homes, even though the big banks get credit for restructuring the second mortgages. The banks get credit towards fulfilling the $46 billion relief package, but the homeowner still gets foreclosed on.
What happens is that a homeowner will be notified that their second mortgage has been reduced, giving false hope that their housing problems are behind them. What ends up happening, however, is that the first mortgage holder has not reduced the principal, and they are free to foreclose and take the home. This does little, if anything, to help the homeowner. It is important to note that when a house is sold in foreclosure, there is typically no money to pay the second mortgage anyway, and the second mortgage holder usually gets nothing. Under the terms of the settlement, though, the banks are receiving credit for giving the second mortgage, even though they most likely would have not have gotten any money for it anyway.
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To set up a free initial consultation, contact our office online or call our foreclosure hotline at 855-289-1660. Or call our office location in Philadelphia at 215-751-0100, or in New Jersey at 856-429-0970.