State Attorneys General, Feds Reach $25 Billion Settlement with Five Largest Mortgage Servicers on Foreclosure Wrongs
The nation’s five largest mortgage servicers have agreed to a landmark $25 billion settlement with a coalition of state attorneys general and federal agencies. The settlement addresses past mortgage loan servicing and foreclosure abuses and fraud, provides substantial financial relief to borrowers harmed by bank fraud, and establishes significant new homeowner protections for the future.
This is the largest joint state-federal settlement in history and it is the result of a massive civil law enforcement investigation and initiative by state attorneys general, state banking regulators, and nearly a dozen federal agencies.
The joint state-federal group announced the agreement with the nation’s five largest servicers: Bank of America Corporation, JPMorgan Chase & Co., Wells Fargo & Company, Citigroup, Inc., and Ally Financial, Inc. (formerly GMAC). Collectively, the five banks service nearly 60 percent of the nation’s mortgages.
“Our goal has been to hold these banks accountable while providing urgently needed relief to homeowners who are struggling because of the banks’ misconduct. This agreement does both,” said Iowa Attorney General Tom Miller. “This agreement will help transform a badly broken system into one that protects borrowers.”
“This agreement delivers real help to homeowners affected by the banks’ dual tracking and other improper mortgage- and foreclosure-related processes,” said Colorado Attorney General Suthers. “As a result of this settlement, the banks will end a series of problematic processes that put homeowners at a severe disadvantage during the foreclosure process. This settlement will not solve every problem with the housing market, but it goes a long way to helping homeowners in distress now and leveling the playing field for consumers.”
Under the agreement, the five servicers have agreed to a $25 billion penalty under a joint state-national settlement structure:
Servicers commit a minimum of $17 billion directly to borrowers through a series of national homeowner relief effort options, including principal reduction. Servicers will likely provide up to an estimated $32 billion in direct homeowner relief.
- Servicers commit $3 billion to an underwater mortgage refinancing program.
- Servicers pay $5 billion to the states and federal government ($4.25 billion to the states and $750 million to the federal government).
- Homeowners receive comprehensive new protections from new mortgage loan servicing and foreclosure standards.
- An independent monitor will ensure mortgage servicer compliance.
- States can pursue civil claims outside of the agreement including securitization claims as well as criminal cases.
- Borrowers and investors can pursue individual, institutional or class action cases regardless of agreement.
“This settlement is a big first step toward addressing the wrongs,” said North Carolina Attorney General Roy Cooper. “Through a powerful agreement, backed by a federal court order and supervised by an independent monitor, we will ensure that servicers are fair with consumers.”
“Our settlement holds America’s largest banks accountable for harms homeowners suffered from shoddy loan servicing, illegal robo-signing and faulty foreclosure processing,” Washington Attorney General Rob McKenna said. “The settlement results from bipartisan cooperation among Democratic and Republican attorneys general partnering with two federal agencies. From the beginning, we have worked to help homeowners harmed by the banks’ corner-cutting and to implement strict new loan servicing and foreclosure standards to prevent future harm.”
“After many months of investigation and negotiation, I’ve concluded that this settlement accomplishes two major goals: it provides timely help for struggling homeowners, and it establishes new rules for mortgage servicing that will protect homeowners in the future,” said Illinois Attorney General Lisa Madigan. “While the settlement is a big step forward in our efforts, it is not the end. In Illinois, we will continue to take strong legal action against lenders, banks, servicers and others who contributed to the housing and economic collapse.”
“Never before have state attorneys general been able to enlist an independent monitor with the backing of a court order to ensure that nationally chartered banks are holding up to their end of the bargain,” said Connecticut Attorney General George Jepsen. “As an independent monitor who has tremendous expertise in the financial sector, a history of looking out for consumers, and a great strategic approach, Joe Smith will look out for the interests of our states’ homeowners.”
A bipartisan negotiating team of state attorneys general negotiated on behalf of the states, and the U.S. Department of Justice (DOJ) and the U.S. Department of Housing and Urban Development (HUD) negotiated on behalf of the federal agencies.
Source: National Association of Attorneys General
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Peggy Berkoff & Andrea DiRico
North County Properties & Investments
19510 US Highway 1, Tequesta, FL 33469
561-427-0470 office, 561-427-0522 fax
Peggy 561-301-2243 cell/text, PBerkoff@NCPflorida.com
Andrea 561-543-8715 cell/text, ADiRico@NCPflorida.com
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