On February 9, 2012, the Department of Justice announced 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).
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.
Permissible purposes for allocation of funds from the State Fund Settlement Amounts include, but are not limited to, supplementing the amounts paid to state homeowners under the Borrower Payment Fund, funding for housing counselors, state and local foreclosure assistance hotlines, state and local foreclosuremediation programs, legal assistance, housing remediation and anti-blight projects, funding for training and staffing of financial fraud or consumer protection enforcement efforts, and civil penalties.
Funding Title: DOJ and State Attorneys General – Settlement Agreement with Five Largest Mortgage Servicers on Mortgage Loan Servicing and Foreclosure Abuses
Agency Name: Department of Justice
Funding Instrument Type: Settlement
Express Language for Legal Aid: Yes
Target Population: Persons who had their homes foreclosed
Cost Sharing or Matching Requirement: No
How to Apply: See: http://www.nationalmortgagesettlement.com/
Current Closing Date for Applications: See: http://www.nationalmortgagesettlement.com/
Estimated Total Program Funding: See: http://www.nationalmortgagesettlement.com/
Eligible Applicants: See: http://www.nationalmortgagesettlement.com/
Priority Consideration: See: http://www.nationalmortgagesettlement.com/
Policy and Regulations on Use of Funding: See: http://www.nationalmortgagesettlement.com/
Link to Full Announcement: http://www.justice.gov/opa/pr/2012/February/12-ag-186.html
Contact Information: http://www.nationalmortgagesettlement.com/