DETROIT — For those who will never be able to repay their existing home loan, today’s loan modification programs are nothing short of a golden opportunity. While the concept of modifying a loan is legally legitimate in its purpose, the inability of homeowners to seek the correct assistance has left millions “underwater.” Prior to the downward spiral in the U.S. housing market, many homeowners in need of these modifications ended up with the short end of the stick, being kicked out of their otherwise valuable homes. Although fingers can be pointed at the major banks for their deceptive and unethical practices, some homeowners can also be blamed for their lack of initiative taken to pursue a home loan modification.

Last week, a $25 billion settlement agreement over prior foreclosure and mortgage loan-servicing abuses was announced by officials at the federal and state level, along with five of the major mortgage servicers. Although this raised even further questions of trust between these major mortgage servicers and homeowners at risk of losing their homes, it has brought great opportunities to many people in the 49 states under the settlement agreement, including Michigan. In order to avail themselves of this great opportunity, homeowners who meet the qualifications under the settlement are well-advised to retain the services of a qualified, legal professional to aid them in obtaining a loan mod.  

Whether it is the reduction in the interest rate on the loan, an extension of the length of the term of the loan, or a different type of loan, qualified lawyers have more vital procedural tools at their disposal than many home loan modification “experts,” and are thus more likely to be successful in obtaining a loan mod. If you or someone you know fits the eligibility criteria under the new settlement agreement, now is the time to seek the help that many individuals in the same circumstance failed to seek in past years. The following information will help you determine eligibility guidelines, and also answer some frequently asked questions:

Q: Who is participating in the settlement?

A: All states except Oklahoma. The five servicers are Bank of America, JPMorgan Chase, Citibank, Wells Fargo and Ally Financial (Others expected to join).

Q: Who may get help under the settlement?

A: Borrowers whose loans are owned by the participating banks and those who suffered foreclosures by one of them from 2008 through 2011. 

Q: Could I still sue if I felt I was wronged after excepting the payment?

A: Yes, either as an individual or as part of a class action. Another possibility is that you could get restitution from a national review of ongoing foreclosures among 14 large servicers, including the five major ones. 

Q: How else will the settlement affect homeowners not in default now?

A: Along with the financial penalties, there are new standards governing future loan servicing and foreclosures. The standards are expected to be tougher than past ones and should improve consumer experiences.

Q: Who is generally likely to be approved for a home loan modification?

A: Federal guidelines state that a home is “unaffordable” when, including taxes and insurance, the house payment is more than 31% of the borrower’s income. Thus, those in the 40-50% range, who have a job and can afford a lower payment, are positioned well to obtain a modification.