Because of the National Mortgage Settlement, signed in February of 2012, homeowners may owe less on their mortgages than they once did. This settlement was the result of the robo-signing scandal that provided evidence that banks were processing foreclosures too quickly without examining the associated paperwork. Because of the settlement, $20 billion dollars has been provided to homeowners so far.
To take advantage of this settlement, homeowners can modify their mortgages or avoid a foreclosure through a short sale to pay the owed debt on the property. Of the available options to homeowners, a short sale is likely better for credit ratings than losing the home to foreclosure. No matter the route you choose, if you are in the position where foreclosure may be a possibility, both a foreclosure and a short sale will leave you without a home, which was not the intention of the settlement. The settlement was actually purposed in keeping people in their homes, but with continued economic instability, it is not always possible to keep people in their homes, so this intended result is not happening as often as it should.
For homeowners in the precarious position of potentially losing their home to foreclosure, it may be possible to make other arrangements with a lender. Through negotiations with the lender before the foreclosure process has started, you may be able to get the lender to reduce the principal on your first mortgage, or even forgive a second mortgage. However, if you cannot get a second mortgage forgiven entirely, you might be able to get a reduction on that mortgage as well because the National Mortgage Settlement has required lenders and banks such as Bank of America, Wells Fargo and Citigroup to help homeowners avoid foreclosure and turn around “upside-down” mortgages.
If you have defaulted on mortgage payments or have been notified of a foreclosure initiation against your home, seek the counsel of an experienced real estate attorney who can help you determine how the National Mortgage Settlement might be able to help you.