News Release 2012-02
Mortgage Servicing Settlement
Page 9
449673.1
Two government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac, control
a majority of the nation’s mortgage loans. GSE loans are not eligible for parts of this
settlement because of positions their regulator, FHFA, has taken.
However, homeowners with GSE-controlled mortgages who won’t directly benefit from
settlement-related programs – that’s most of us – will still see benefits through dropping
foreclosures, stabilizing home values and significant new mortgage servicing standards
and consumer protections.
This settlement, in addition to recent federal efforts to modify Freddie and Fannie loans,
means that the majority of distressed borrowers might qualify for some level of help.
Q: What about those of us who keep making our mortgage payments?
A: Borrowers who are current in their payments but are “underwater” on their
mortgages may qualify for refinancing relief under the settlement.
Beyond that, the mortgage servicers involved in this settlement broke the law, the
conduct harmed borrowers, and this settlement addresses that conduct. If the
mortgage servicers followed the law, many foreclosures likely could have been
prevented. Foreclosure has a profound impact beyond the borrower and the creditor. A
foreclosure affects homeowners, families, neighborhoods, communities, the housing
market and our overall economy.
When a house is subject to foreclosure, it creates a ripple effect that lowers the value of
nearby single-family homes and other properties. In 2009 the Center for Responsible
Lending projected that homeowners living near foreclosed properties, on average,
would lose $7,200 in property value, and projected a four-year increase in losses to
$20,300 per household.
Foreclosures contribute to unstable family and social environments. They increase
stress on homeowners, their families and their neighbors. These deteriorating,
neglected properties and neighboring property value losses create neighborhood blight,
cut a community’s tax base, and can contribute to crime. Displaced homeowners put
other stresses on communities, including the need for shelter and social services.
Foreclosures affect everyone and affect our economy – even those who play by the
rules and pay their monthly mortgage on time.
Q: Why force banks to forgive large portions of peoples’ loans?