FOR IMMEDIATE RELEASE
Thursday, February 9, 2012
WASHINGTON – U.S. Attorney General Eric Holder, Department of Housing
and Urban Development (HUD) Secretary Shaun Donovan, Iowa Attorney
General Tom Miller and Colorado Attorney General John W. Suthers
announced today that the federal government and 49 state attorneys
general have reached a landmark $25 billion agreement with the nation’s
five largest mortgage servicers to address mortgage loan servicing and
foreclosure abuses. The agreement provides substantial financial relief
to homeowners and establishes significant new homeowner protections for
the future.
The unprecedented joint agreement is the largest federal-state civil
settlement ever obtained and is the result of extensive investigations
by federal agencies, including the Department of Justice, HUD and the
HUD Office of the Inspector General (HUD-OIG), and state attorneys
general and state banking regulators across the country. The joint
federal-state group entered into the agreement with the nation’s five
largest mortgage servicers: Bank of America Corporation, JPMorgan Chase
& Co., Wells Fargo & Company, Citigroup Inc. and Ally Financial
Inc. (formerly GMAC).
“This agreement – the largest joint federal-state settlement ever
obtained – is the result of unprecedented coordination among enforcement
agencies throughout the government,” said Attorney General Holder. “It
holds mortgage servicers accountable for abusive practices and requires
them to commit more than $20 billion towards financial relief for
consumers. As a result, struggling homeowners throughout the country
will benefit from reduced principals and refinancing of their loans.
The agreement also requires substantial changes in how servicers do
business, which will help to ensure the abuses of the past are not
repeated.”
“This historic settlement will provide immediate relief to homeowners –
forcing banks to reduce the principal balance on many loans, refinance
loans for underwater borrowers, and pay billions of dollars to states
and consumers,” said HUD Secretary Donovan. “
Banks must follow the laws. Any bank that hasn’t done so should be held
accountable and should take prompt action to correct its mistakes. And
it will not end with this settlement. One of the most important
ways this settlement helps homeowners is that it forces the banks to
clean up their acts and fix the problems uncovered during our
investigations. And it does that by committing them to major reforms in
how they service mortgage loans. These new customer service standards
are in keeping with the Homeowners Bill of Rights recently announced by
President Obama – a single, straightforward set of commonsense rules
that families can count on.”
“This monitored agreement holds the banks accountable, it provides badly
needed relief to homeowners, and it transforms the mortgage servicing
industry so now homeowners will be protected and treated fairly,” said
Iowa Attorney General Miller.
“This settlement has broad bipartisan support from the states because
the attorneys general realize that the partnership with the federal
agencies made it possible to achieve favorable terms and conditions that
would have been difficult for the states or the federal government to
achieve on their own,” said Colorado Attorney General Suthers.
The joint federal-state agreement requires servicers to implement
comprehensive new mortgage loan servicing standards and to commit $25
billion to resolve violations of state and federal law. These
violations include servicers’ use of “robo-signed” affidavits in
foreclosure proceedings; deceptive practices in the offering of loan
modifications; failures to offer non-foreclosure alternatives before
foreclosing on borrowers with federally insured mortgages; and filing
improper documentation in federal bankruptcy court.
Under the terms of the agreement, the servicers are required to
collectively dedicate $20 billion toward various forms of financial
relief to borrowers. At least $10 billion will go toward reducing the
principal on loans for borrowers who, as of the date of the settlement,
are either delinquent or at imminent risk of default and owe more on
their mortgages than their homes are worth. At least $3 billion will go
toward refinancing loans for borrowers who are current on their
mortgages but who owe more on their mortgage than their homes are
worth. Borrowers who meet basic criteria will be eligible for the
refinancing, which will reduce interest rates for borrowers who are
currently paying much higher rates or whose adjustable rate mortgages
are due to soon rise to much higher rates. Up to $7 billion will go
towards other forms of relief, including forbearance of principal for
unemployed borrowers, anti-blight programs, short sales and transitional
assistance, benefits for service members who are forced to sell their
home at a loss as a result of a Permanent Change in Station order, and
other programs. Because servicers will receive only partial credit for
every dollar spent on some of the required activities, the settlement
will provide direct benefits to borrowers in excess of $20 billion.
Mortgage servicers are required to fulfill these obligations within
three years. To encourage servicers to provide relief quickly, there
are incentives for relief provided within the first 12 months.
Servicers must reach 75 percent of their targets within the first two
years. Servicers that miss settlement targets and deadlines will be
required to pay substantial additional cash amounts.
In addition to the $20 billion in financial relief for borrowers, the
agreement requires the servicers to pay $5 billion in cash to the
federal and state governments. $1.5 billion of this payment will be
used to establish a Borrower Payment Fund to provide cash payments to
borrowers whose homes were sold or taken in foreclosure between Jan. 1,
2008 and Dec. 31, 2011, and who meet other criteria. This program is
separate from the restitution program currently being administered by
federal banking regulators to compensate those who suffered direct
financial harm as a result of wrongful servicer conduct. Borrowers will
not release any claims in exchange for a payment. The remaining $3.5
billion of the $5 billion payment will go to state and federal
governments to be used to repay public funds lost as a result of
servicer misconduct and to fund housing counselors, legal aid and other
similar public programs determined by the state attorneys general.
The $5 billion includes a $1 billion resolution of a separate
investigation into fraudulent and wrongful conduct by Bank of America
and various Countrywide entities related to the origination and
underwriting of Federal Housing Administration (FHA)-insured mortgage
loans, and systematic inflation of appraisal values concerning these
loans, from Jan. 1, 2003 through April 30, 2009. Payment of $500
million of this $1 billion will be deferred to partially fund a loan
modification program for Countrywide borrowers throughout the nation who
are underwater on their mortgages. This investigation was conducted by
the U.S. Attorney’s Office for the Eastern District of New York, with
the Civil Division’s Commercial Litigation Branch of the Department of
Justice, HUD and HUD-OIG. The settlement also resolves an investigation
by the Eastern District of New York, the Special Inspector General for
the Troubled Asset Relief Program (SIGTARP) and the Federal Housing
Finance Agency-Office of the Inspector General (FHFA-OIG) into
allegations that Bank of America defrauded the Home Affordable
Modification Program.
The joint federal-state agreement requires the mortgage servicers to
implement unprecedented changes in how they service mortgage loans,
handle foreclosures, and ensure the accuracy of information provided in
federal bankruptcy court. The agreement requires new servicing
standards which will prevent foreclosure abuses of the past, such as
robo-signing, improper documentation and lost paperwork, and create
dozens of new consumer protections. The new standards provide for
strict oversight of foreclosure processing, including third-party
vendors, and new requirements to undertake pre-filing reviews of certain
documents filed in bankruptcy court.
The new servicing standards make foreclosure a last resort by requiring
servicers to evaluate homeowners for other loss mitigation options
first. In addition, banks will be restricted from foreclosing while the
homeowner is being considered for a loan modification. The new
standards also include procedures and timelines for reviewing loan
modification applications and give homeowners the right to appeal
denials. Servicers will also be required to create a single point of
contact for borrowers seeking information about their loans and maintain
adequate staff to handle calls.
The agreement will also provide enhanced protections for service members
that go beyond those required by the Servicemembers Civil Relief Act
(SCRA). In addition, the four servicers that had not previously
resolved certain portions of potential SCRA liability have agreed to
conduct a full review, overseen by the Justice Department’s Civil Rights
Division, to determine whether any servicemembers were foreclosed on in
violation of SCRA since Jan. 1, 2006. The servicers have also agreed
to conduct a thorough review, overseen by the Civil Rights Division, to
determine whether any servicemember, from Jan. 1, 2008, to the present,
was charged interest in excess of 6% on their mortgage, after a valid
request to lower the interest rate, in violation of the SCRA. Servicers
will be required to make payments to any servicemember who was a victim
of a wrongful foreclosure or who was wrongfully charged a higher
interest rate. This compensation for servicemembers is in addition to
the $25 billion settlement amount.
The agreement will be filed as a consent judgment in the U.S. District
Court for the District of Columbia. Compliance with the agreement will
be overseen by an independent monitor, Joseph A. Smith Jr. Smith has
served as the North Carolina Commissioner of Banks since 2002. Smith is
also the former Chairman of the Conference of State Banks Supervisors
(CSBS). The monitor will oversee implementation of the servicing
standards required by the agreement; impose penalties of up to $1
million per violation (or up to $5 million for certain repeat
violations); and publish regular public reports that identify any
quarter in which a servicer fell short of the standards imposed in the
settlement.
The agreement resolves certain violations of civil law based on mortgage
loan servicing activities. The agreement does not prevent state and
federal authorities from pursuing criminal enforcement actions related
to this or other conduct by the servicers. The agreement does not
prevent the government from punishing wrongful securitization conduct
that will be the focus of the new Residential Mortgage-Backed Securities
Working Group. The United States also retains its full authority to
recover losses and penalties caused to the federal government when a
bank failed to satisfy underwriting standards on a government-insured or
government-guaranteed loan. The agreement does not prevent any action
by individual borrowers who wish to bring their own lawsuits. State
attorneys general also preserved, among other things, all claims against
the Mortgage Electronic Registration Systems (MERS), and all claims
brought by borrowers.
Investigations were conducted by the U.S. Trustee Program of the
Department of Justice, HUD-OIG, HUD’s FHA, state attorneys general
offices and state banking regulators from throughout the country, the
U.S. Attorney’s Office for the Eastern District of New York, the U.S.
Attorney’s Office for the District of Colorado, the Justice Department’s
Civil Division, the U.S. Attorney’s Office for the Western District of
North Carolina, the U.S. Attorney’s Office for the District of South
Carolina, the U.S. Attorney’s Office for the Southern District of New
York, SIGTARP and FHFA-OIG. The Department of Treasury, the Federal
Trade Commission, the Consumer Financial Protection Bureau, the Justice
Department’s Civil Rights Division, the Board of Governors of the
Federal Reserve System, the Federal Deposit Insurance Corporation, the
Office of the Comptroller of the Currency, the Department of Veterans
Affairs and the U.S. Department of Agriculture made critical
contributions.
For more information about the mortgage servicing settlement, go to www.NationalMortgageSettlement.com. To find your state attorney general’s website, go to www.NAAG.org and click on “The Attorneys General.”
No comments:
Post a Comment