The 16-month saga delving into sloppy foreclosure processes by the nation's largest mortgage lenders culminated in yesterday's announcement that a $25 billion settlement had been reached.
Billed as a victory for ill-treated homeowners and victims of the robo-signing scandal, the agreement could help close to 2 million Americans, according to federal officials.
But how do you know if you're eligible for a cut of the multibillion-dollar settlement? And how do you go about making a claim? We take a closer look at the nuts and bolts of the mortgage settlement:
Does my mortgage qualify?
The current agreement applies only to mortgages serviced by Citi, Ally/GMAC, Wells Fargo, Bank of America, and JPMorgan Chase. That's a pretty substantial chunk of the market—about half, according to Trulia Chief Economist Jed Kolko—but you're out of luck if your home loan is backed by the government (Fannie Mae, Freddie Mac, or FHA) or you live in Oklahoma. (Oklahoma was the only state opt out of the agreement, and instead forged a separate agreement with the five banks.)
How do you know who services your loan and if you qualify? Call the bank you write your monthly mortgage check to and see if you're eligible for help.
Check out this site for more information on how to contact your mortgage servicer.
Who gets what?
The details are still murky, but the biggest slice of the pie—at least $10 billion—will go toward principal reductions and other loan modifications. On average, those who qualify could get $20,000 or more shaved off the amount they owe, according to HUD Secretary Shaun Donovan. Banks can use another $7 billion to help unemployed borrowers, facilitate short sales, and support struggling service members.
Another $3 billion will be spent refinancing homeowners who, while current on their payments, owe more on their mortgage than their home is worth.
Finally, $5 billion will be committed to states to compensate former homeowners whose properties were recently foreclosed on as a result of questionable practices by mortgage servicers, and to establish consumer protection and foreclosure protection programs.
If my mortgage qualifies, what's next?
The word "immediate" has been thrown around quite a bit in discussions of the settlement, but eligible borrowers will have to sit tight for a while.
According to a new website set up by the government to educate the public about the details of the settlement, it's going to take a couple of months just for negotiators to sort through how to manage the claims process.
It will take another six to nine months to actually identify homeowners eligible for cash payments, principal reductions and refinancing. You can expect a letter in the mail if you qualify.
Overall, it could take three years to comb through the tangled mess of the robo-signing scandal.
$25 billion is big, but is it big enough?
"Relative to other housing policies, it's big," Kolko wrote in an E-mail. "It calls for much more money for loan modifications and it could mean money or relief for close to two million current and former homeowners."
But relative to the magnitude of the housing crisis, $17 billion is a drop in the bucket. Kolko estimates more than 11 million homeowners are struggling with "underwater" mortgages to the tune of more than $700 billion.
What if I don't qualify?
If your mortgage isn't serviced by the banks that signed on to the settlement, don't fret. According to CNN Money, the government hopes to add another nine servicers to the agreement, which could bring the total aid amount to $30 billion.
If you have a government-backed loan, programs still exist to assist struggling borrowers. Find out if your mortgage is owned by Fannie Mae or Freddie Mac here, and for more information on borrower assistance.