During the housing and foreclosure crisis, thousands of New Jersey residents were hurt by improper behavior on the part of lenders, banks and mortgage servicers. Many more wound up underwater, with mortgages far higher than their homes were actually worth.
State and federal governments went up against the mortgage companies for these abuses and, earlier this month, they reached a record $25 billion settlement with five of the nation’s largest banks. $837 million of that settlement is earmarked for New Jersey, the bulk of which is designed to offer debt relief to struggling homeowners.
Most of the settlement money will be used to lower the principal on underwater mortgages. It is estimated that around 300,000 New Jersey residents owe more on their mortgages than their homes are worth. The refinancing will result in lower monthly payments that would allow some homeowners to be able to afford to keep their homes.
The settlement will also provide $2,000 to homeowners who were hurt by improper bank behavior during the so-called “robo-signing” scandal.
Some Say Settlement Doesn’t Go Far Enough
Although the settlement certainly has its champions, it is drawing ire from consumer advocates who say it does not go far enough.
For example, they say that the penalties for robo-signing, forging foreclosure documents and other bad deeds by the banks are not nearly high enough. They argue that $2,000 is paltry compensation for having been the victim of improper foreclosure. Many think that the bad actors should have been given jail time for their fraudulent behavior.
Further, although refinancing will be a boon for those homeowners who can get it, not everyone will qualify. By some estimates, more than 90 percent of underwater homeowners won’t be eligible to have their principal reduced. Some, however, will be eligible to refinance at a lower interest rate.
The general consensus seems to be that the settlement is a step in the right direction, albeit one that is not quite large enough.
Source: NorthJersey.com, “NJ Homeowners Due $837M in Foreclosure Settlement Between Feds, Big Banks,” Kathleen Lynn, Feb. 9, 2012.