If you've been paying attention to the news lately, you may have heard of the National Mortgage Settlement, but you may not know how it affects you.
Back in February, the Attorney General announced that the federal government and 49 state attorneys general had joined forces in a settlement with the country's five largest mortgage loan companies -- Ally/GMAC, Bank of America, Citi, JPMorgan Chase, and Wells Fargo.
Why? The states and the federal government had all been investigating claims that these five lenders were cutting corners on foreclosures -- along with skirting a variety of other laws.
According to the website set up by the state and federal authorities investigating the situation, "The loan servicers routinely signed foreclosure related document outside the presence of a notary public and without really knowing whether the facts they contained were correct.
Both of these practices violate the law.
" The settlement was for $25 billion.
That money went to distressed borrowers, along with the states involved, and the federal government.
According to the Justice Department, it's the largest consumer financial protection settlement in America's history.
So, how does it affect you? The National Mortgage Settlement provides benefits to homeowners who have their mortgage loan through one of these five banks.
Depending on your specific circumstances, you may be eligible for direct payment benefits.
Unfortunately, you may not know if you're eligible anytime soon.
That's because it may take the servicers up to three years to let you know that you qualify! What happens if you do qualify? A total of $1.
5 billion is expected to be distributed to over 750,000 homeowners nationwide.
If you're one of them, you'll fall into one of these three groups:

• Homeowners who need loan modifications now

The settlement requires the five loan services to work off $17 billion in principal loan modifications, including first and second lien principal reduction.
If you qualify, your loan officer is required to contact you, but it may take up to three years for this to occur.

• Borrowers who need to refinance

The settlement is also designed to keep more people in their homes, so the loan servicers are required to offer up to $3 billion in refinancing relief.
The thought behind this is if more people can refinance at a lower interest rate than they have been paying, there might be fewer foreclosures in the future.

• Borrowers who lost their homes between from 2008 to 2011

If you lost your home due to foreclosure between the dates of January 1st, 2008 and December 31st, 2011, you may be eligible for a cash payment.
However, there are stipulations you have to agree to before you get any money:

• First, you have to contact the lender, not vice versa.
  Anyone who qualifies for this payment must send in a claim form.
  
• Second, if you agree to take the cash payment, you also must agree to release any private claims you have made against the lender.
  
• Third, if you take the settlement, you must agree that you will not participate in the individual review process that is currently being conducted by the federal banking regulators.
  

Is the settlement really working? Some would argue no.
In some states, payments have already begun, but not in the way that many had anticipated.
According to the California Reinvestment Corporation, the lenders there have made little headway with principal reductions with borrowers.
Instead, they have prioritized short sales.
Others argue that since the Office of Mortgage Settlement Oversight is not collecting demographic data of those receiving mortgage debt relief from the settlement (like their age, race, sex, income, etc.
) it's hard to determine if they money is actually going to the communities and neighborhoods that have been hit hardest by foreclosures.
Where can you turn if you have any questions? The federal government and state attorneys general have set up a website, www.
NationalMortgageSettlement.
com as a resource for homeowners who have questions about the settlement.