We reported earlier on the national mortgage fraud settlement between the federal government, state attorneys general, and the five largest mortgage servicers. (Go here and here, for instance.) The settlement's official website has lots of information, including an executive summary, which sets out some of the settlement's key terms. The summary discusses the billions of dollars aimed at helping homeowners facing foreclosure to stay in their homes:
The settlement requires the five banks to allocate a total of $17 billion in assistance to borrowers
who have the intent and ability to stay in their homes while making reasonable payments on their
mortgage loans. At least 60 percent of the $17 billion must be allocated to reduce the principal
balance of home loans for borrowers who are in default or at risk of default on their loan payments.
Many homeowners, particularly in states like Florida, Arizona, Nevada and California, have
negative equity in their homes and have no realistic ability of refinancing or selling their homes, or
to build equity. Principal reductions will also yield lower payments and will give homeowners a
fair opportunity to preserve their homes.
On August 29, 2012, the settlement monitor, Joseph A. Smith, issued his first progress report on the settlement. At Credit Slips, Adam Levitin offers a preliminary (and skeptical) assessment of the report, pointing out, among other things, that only a tiny percentage of underwater borrowers have been helped by the settlement so far.