While struggling homeowners everywhere are scrambling to benefit from the
multi-billion dollar settlement announced earlier this month, four of
the powerhouse banks are enjoying an additional bonus from the settlement.
The five banks that service almost half the nation's mortgages, Bank
of America Corp., Wells Fargo, JPMorgan Chase, Citigroup and Ally Financial,
will receive protection for billions of dollars in home-equity loans they hold.
According to Bloomberg reports early this morning, these banks will share
losses they suffered on their junior liens and get credit toward the money
they would be spending in the settlement. While the details of this have
not been made public, an Obama official indicated that while banks will
receive a credit for writing down home equity loans, they won't receive
as much as they will for reducing primary mortgage balances. The hope
is that more loans will be modified with this loss-sharing program by
making the banks suffer losses on their junior liens on an equal basis
as first-lien investors. One of the hurdles in obtaining modifications
has been these big banks trying to protect their second liens. If they
suffer losses on an equal basis as first-lien holders, loan modifications
may more easily occur.
Critics of the program argue that the banks got away with a cheap resolution
and that this will cause higher rates for primary mortgages in the way
of risk premiums being added. The feeling is that first lien mortgages
will become more expensive because they are no longer treated as a priority
to second lien holder.
As the details of this program have not been made public, please continue
to visit our blogs to read up-to-date information. The attorneys at Law
Office of Tauna R. Bogle will keep you updated and can answer questions
you have about the foreclosure process and current trends.