If nothing else, at least
one family has been offered a principal reduction as a result of the foreclosure fraud settlement. Normally, this story
would make me hopeful that the foreclosure fraud settlement will lead
to significant changes in the foreclosure landscape. However, even though
Bank of America has been provided with both cash incentives to modify
loans and a court order compelling it to reduce principal balances on
mortgages, the article notes that the Vallejo family, who received the
principal reduction, are going to be required to complete a trial period
before being finally approved for their newly modified loan.
Trial periods are nothing new, but they have been significantly abused
in the past. Bank of America is no stranger to keeping borrowers stuck
in a series of perpetual trial modifications only to ultimately deny a
loan modification a year later. Although the Vallejo family has been given a glimmer of
hope, they are still left at the mercy of Bank of America.
Keep in mind that the foreclosure fraud settlement is less than strict
when it comes to enforcing the terms of the settlement. It is entirely
possible that this deal could fall apart, yet be an error that does not
require reporting or that does not pass the threshhold for number of errors
required to trigger a violation of the settlement. Hopefully this specific
situation will work out for everyone involved.
If you are attempting to obtain a loan modification from your mortgage
lender and are hoping that the foreclosure fraud settlement will lead
to a principal reduction or other favorable terms, do not forget that
until there is a fully-executed, permanent loan modification in place,
there is no true guarantee that your servicer or lender will follow through
on its promises. Although Illinois law may protect borrowers in these
situations, using recent changes in the law to your advantage will require
filing a lawsuit or a counterclaim in an existing foreclosure case.
For borrowers seeking predictable outcomes, the foreclosure fraud settlement
is still an unknown factor.