Federal Mortgage Lender Settlement Brings Relief to Indiana Homeowners

This February, the federal government announced the biggest multi-state settlement since the big tobacco settlements in 1998. The government agreed to a $25 billion deal with the nation's five largest banks that participated in systemic, rampant mortgage fraud that targeted American homeowners.

The banks involved include Citigroup, JPMorgan Chase, Wells Fargo, Ally Financial and Bank of America, which acquired Countrywide Financial in 2008 and has taken the heat for Countrywide's predatory mortgage practices. Every state in the union except Oklahoma signed the landmark settlement, which the government claims is only its first step toward holding banks guilty of predatory lending practices responsible for their actions.

The settlement will help more than a million Americans currently underwater on their homes reduce their loan amounts and will provide $2,000 checks to 750,000 homeowners who were improperly foreclosed on in the past. The vast majority of the settlement money will go toward alleviating the pressure on current underwater homeowners and preventing improper home foreclosures in the future. Homeowners with Freddie Mac or Fannie Mae loans are not included in the settlement.

Impact for Indiana Homeowners

The settlement requires banks to refinance the loans of homeowners currently underwater on their properties. In total, Indiana will receive $145 million from the banks, $97 million of which will go directly to homeowners. $43 million will go to homeowners currently underwater on their home, and other borrowers can access another $30 million for long-term loan modifications. The remaining funds will go to the Attorney General who is tasked with developing tougher consumer protection rules and foreclosure prevention programs.

The federal government has set up an online resource for homeowners underwater on their properties and interested in how the settlement may benefit them. The website includes information on who is eligible for settlement benefits and includes a timeline for how the awards will be distributed. Eligible homeowners will be identified over the next few months and banks will have three years to pay them back or issue loan refinancing or modifications.

Though some critics of the new settlement believe the government settled before it fully understood the extent of the fraud, the nearly record-setting award will help over a million Americans avoid foreclosure.

If you or a loved one believes you may qualify for an award from the new settlement, and are considering bankruptcy as a result of the condition of your mortgage, please consult an experienced bankruptcy attorney.