Hundreds of thousands of California homeowners stand to benefit directly from a landmark $25-billion settlement that federal officials, state attorneys general and the nation's five largest mortgage servicers agreed to on Thursday.
California Atty. Gen. Kamala D. Harris said that residents could receive as much as $18 billion in assistance from the settlement. The Times answers some basic questions about what homeowners should expect next.
Who gets money from this settlement?
Only homeowners who borrowed money from one of the big five servicers — Bank of America Corp., JPMorgan Chase & Co., Wells Fargo Co., Citigroup Inc. and Ally Financial Inc. — are covered. Loans owned by the government-sponsored Fannie Mae and Freddie Mac are not covered. Federal and state officials are attempting to get nine more large mortgage servicers to sign on to Thursday's settlement, which could bring in an additional $5 billion.
How do I verify that I qualify?
Borrowers will eventually receive letters from their mortgage servicers. In the meantime, homeowners can access information from each of the banks online, or call these numbers:
Bank of America: 877-488-7814
JPMorgan Chase: 866-372-6901
Wells Fargo: 800-288-3212
How long will it take to get help?
The settlement will be submitted to a federal judge in the next few weeks for approval. Within days of that approval, servicers will have to put the money into a special trust fund. There will be incentives for servicers to help homeowners quickly — within the first 12 months of the agreement — but they technically have up to three years to distribute the funds.
I still own my home, but I'm in trouble. What kind of aid will I receive?
Many "underwater" homeowners in California, who owe more than their houses are worth, can expect to get principal write-downs. Many will be allowed to execute short sales and sell their homes for less than the amounts they owe. Others will be receiving restitution for paperwork and other problems suffered during the foreclosure process. Borrowers in these situations should expect to be contacted directly by their mortgage servicers.
My house has already been foreclosed. Do I benefit?
Yes. About $1.5 billion will be distributed directly to Californians whose homes were foreclosed from 2008 through 2011. Officials estimated that the average payout would be $1,500 to $2,000. A settlement administrator will send claim forms to eligible people.
If I do get money from this settlement, do I need to pay taxes on it?
It's unclear. The Internal Revenue Service declined to comment on Thursday.
My region was hit hard by the housing crisis. Do I get priority?
A series of incentives built into the deal will help channel aid to distressed areas, such as Stockton, first. The terms of the deal call for those hardest-hit areas to receive relief within the first year of the settlement. The counties of Los Angeles, Riverside, San Bernardino, Sacramento and Stanislaus are expected to receive the most aid.
Why don't I get more money?
Officials said they wanted to get some money to homeowners quickly before more people lose their homes. Ongoing litigation would have meant more time and bigger risk, with no guarantee of additional reward.