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Attorney General Sam Olens Joins $25 Billion Federal-State Settlement with Nation's Five Largest Mortgage Servicers

PRESS ADVISORY

Attorney General Sam Olens Joins $25 Billion Federal-State Settlement with Nation's Five Largest Mortgage Servicers

February 9, 2012

Attorney General Sam Olens formally joined a landmark $25 billion federal-state agreement involving 49 states with the nation’s five largest mortgage servicers – Bank of America, JPMorgan Chase, Wells Fargo, Citi and Ally/GMAC – over unacceptable nationwide mortgage servicing practices related to foreclosures. Georgians’ estimated share of the settlement is valued at $814,716,328.36.

The proposed agreement holds mortgage servicers accountable for past mortgage servicing and foreclosure fraud and provides relief to homeowners. Moreover, the settlement puts in place new protections for borrowers by requiring the first ever, nationwide reforms to servicing standards.

“In Georgia, we continue to face skyrocketing rates of foreclosures and decreasing home values, which have an adverse impact on the housing market and our economic recovery,” said Attorney General Sam Olens. “This agreement will bring stability to the housing market by instituting comprehensive mortgage servicing standards and offering immediate relief to many borrowers who have the intent and ability to stay in their homes.”

The negotiations focused on robo-signing and mortgage servicing misconduct, such as dual-tracking. 

The resulting federal-state settlement addresses the primary goals of the attorneys general: to bring badly needed reform to the mortgage servicing industry; to ensure that foreclosures are lawfully conducted; to provide immediate relief to enable struggling homeowners to avoid foreclosure; and to penalize mortgage servicers for robo-signing misconduct. 

Full litigation of the states’ claims would likely have taken years, at a time when the foreclosure crisis requires immediate relief for homeowners. Further, adjudication of state-based robo-signing claims may have led to civil penalties but could not have yielded the amount and scope of the relief obtained in this settlement.

Below are key provisions of the settlement:

  • First ever nationwide reforms to servicing standards. These servicing standards require a single point of contact for borrowers’ ease in communicating with servicers, adequate staffing levels and training, better communication with borrowers, appropriate standards for executing documents in foreclosure cases, and ending improper fees. Specifically:
    • Borrowers must be thoroughly evaluated for all available loss mitigation options before foreclosure referral, and banks must act on loss mitigation applications before referring loans to foreclosure; i.e. “dual tracking” will be restricted.
    • Borrowers must be sent a pre-foreclosure notice that will include a summary of loss mitigation options offered, an account summary, description of facts supporting lender’s right to foreclose, and a notice that the borrower may request a copy of the loan note and the identity of the investor holding the loan. 
    • Information in foreclosure affidavits must be personally reviewed and based on competent evidence. 
    • Holders of loans and their legal standing to foreclose must be documented and disclosed to borrowers.
    • Servicers are required to expedite and facilitate short sales of distressed properties.
       
  • Additional protections for active military that go beyond current law. The Servicemembers Civil Relief Act (SCRA) provides protections for active service members, including postponing or suspending certain civil obligations, such as mortgage payments and foreclosure. This settlement provides enhanced safeguards for military personnel that go beyond SCRA protections, including extending the window of protections for qualified service members, and not requiring service members to be delinquent to qualify for a short sale, loan modification, or other loss mitigation relief if the service member suffers financial hardship and is otherwise eligible for such loss mitigation.
     
  • Immediate aid to borrowers who are current, but owe more than their homes are currently worth. For those loans held by the servicers, borrowers will be able to refinance at today’s historically low interest rates. Servicers will have to provide up to $3 billion in refinancing relief nationwide. The value of refinanced loans to Georgia’s underwater borrowers is an estimated $101.8 million.
     
  • Immediate aid to homeowners needing loan modifications now. The servicers are required to provide up to $17 billion in principal reduction and other forms of loan modification relief nationwide. Georgia’s borrowers will receive an estimated $526 million in benefits from loan term modifications and other direct relief.
     
  • Immediate payments to signing states. Georgia will receive a direct payment of $104 million. Georgia law requires the funds to go to the State Treasury for appropriation by the General Assembly. The intent of the settlement is that the funds “be used for purposes intended to avoid preventable foreclosures, to ameliorate the effects of the foreclosure crisis, to enhance law enforcement efforts to prevent and prosecute financial fraud, or unfair or deceptive acts or practices and to compensate the States for costs resulting from the alleged unlawful conduct of the Defendants.” Examples provided by the settlement include “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 foreclosure mediation 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.” There is, however, no legal requirement that the funds be spent for any particular purpose; Georgia law leaves that decision to the appropriating authority.
     
  • Immediate payments to borrowers who lost their homes to foreclosure.Georgia’s borrowers who lost their home to foreclosure from January 1, 2008, through December 31, 2011, and suffered servicing abuse, qualify for approximately $1800 to $2000 in cash payments without having to release private claims against the servicers or the right to participate in the Office of the Comptroller of the Currency review process. It is estimated that $1.5 billion will be distributed nationwide to some 750,000 borrowers. Georgia’s borrowers will receive an estimated $82.7 million in benefits under this category.
     
  • An independent monitor will ensure mortgage servicer compliance.National banks will be required to regularly report compliance with the settlement to an independent, outside monitor that reports to state attorneys general. Servicers will have to pay heavy penalties for non-compliance with the settlement, including missed deadlines.
     
  • Banks are still accountable for other claims not covered by this settlement.The agreement holds the banks accountable for their wrongdoing on robo-signing and mortgage servicing. The settlement does not grant any immunity from criminal offenses and will not affect criminal prosecutions, nor does it prevent homeowners or investors from pursuing individual, institutional or class action civil cases against the five servicers. No claims are being settled regarding the securitization of mortgage-backed securities or Mortgage Electronic Registration Systems.

The final agreement, through a consent judgment, will be filed in U.S. District Court in Washington, D.C., and will have the authority of a court order.

Because of the complexity of the mortgage market and this agreement, in some cases participating mortgage servicers will contact borrowers directly regarding loan modification options. However, borrowers should contact their mortgage servicer to obtain more information about specific loan modification programs and whether they qualify under terms of this settlement. Settlement administrators may also contact borrowers regarding certain aspects of the settlement. Neither the Attorney General’s Office nor any other state agency will be able to tell individual borrowers whether they are eligible for specific relief.

More information will be made available as the settlement programs are implemented.

For more information on the agreement, visit www.NationalMortgageSettlement.com.

Phone numbers for mortgage servicers which have joined the proposed settlement are listed below.

  • Bank of America:     1-877-488-7814
  • Citi:                        1-866-272-4749
  • JPMorgan Chase:     1-866-372-6901
  • Ally/GMAC:             1-800-766-4622
  • Wells Fargo:            1-800-288-3212