After 10 months of intensive Negotiations between what are considered to be the 5 major banks and a coalition of State attorneys general, federal agencies including the DOJ, Treasury and HUD, a settlement was reached recently that will result in approximately $25 Billion in monetary sanctions and relief for US Homeowners, including $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 defaulting on their loan payments.

This historic settlement is designed to help hundreds of thousands of distressed homeowners stay in their homes via enhanced loan modifications plus there will be comprehensive reforms of mortgage loan servicing and new mandated standards lenders must meet regarding mortgage servicing and foreclosure documentation.

The highlights for many homeowners are that Dual Tracking will be restricted which will reduce stress for homeowners in the modification and short sale process since dual tracking allowed banks to continue to process foreclosures while they were also processing loan modifications, work out and short sales sometimes leading to foreclosures just days before a  successful resolution  could be consummated.

Other good news is an increased budget for Relocation funds for homeowners who opt to utilize a short sale rather than a foreclosure, as $5.2 Billion dollars have been allocated for this and other forms of homeowner assistance, including the facilitation of short sales.

The bad news for homeowners in default is that while these settlement negotiations have been in process many lenders stalled processing foreclosures and now that the settlement has been inked these lenders will likely move rapidly to foreclose upon homeowners who are in default and not short selling.

For those who have already suffered a foreclosure there is an earmarked fund of approximately $1.5 billion of the settlement funds will be allocated to compensation to borrowers who were foreclosed on after January 1, 2008 in increments averaging $2000 on primary residences.  Homeowners, whose loan was serviced by a participating servicer, may be eligible for an Independent Foreclosure Review. See for an independent review of foreclosure on a primary residence between January 1, 2009 and December 31, 2010.

For more information on the National Mortgage Settlement: