February 9, 2012

A Historic Agreement to Right Wrongs

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This post is also available in: Spanish

Secretary Donovan at DOJ Announcing Settlement

Secretary Donovan announces the settlement at the Department of Justice in the company of Attorney General Eric Holder and Attorneys General from affected states.

American families are all too familiar with the story: just when they thought they had achieved the dream of owning their own home, abuses in the financial and mortgage sector came back to haunt them and sent them spiralling into foreclosure – often through no fault of their own. Countless other families are still struggling to keep their underwater mortgages today.

That is why a historic agreement announced today could not come any sooner. Today the federal government and state attorneys generals for 49 states and the District of Columbia reached a $25 billion agreement with the nation’s five largest mortgage servicers. As a result, struggling homeowners throughout the country will benefit from reduced principals and refinancing of their loans.

“No compensation, no amount of money, no measure of justice is enough to make it right for a family who’s had their piece of the American Dream wrongly taken from them,” said President Barack Obama. “And no action, no matter how meaningful, is going to, by itself, entirely heal the housing market.  But this settlement is a start.”

Besides offering real financial relief to homeowners, the agreement will establish significant new homeowner protections so that unacceptable abuses of the past that worsened the housing crisis never repeat themselves. These abuses included: “robo-signing” of foreclosures, deceptive practices in loan modifications; failures to offer alternatives to foreclosure for borrowers with federally insured mortgages, and filing improper documentation in federal bankruptcy court.

“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, adding that: “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.”

The settlement came about through a joint federal-state group that includes the Department of Justice, HUD, the HUD Office of the Inspector General and state attorneys general who 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).

Some specifics of the broad agreement include:

  • 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 toward 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.
  • 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.
    • 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.

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.”


17 Responses to A Historic Agreement to Right Wrongs

  1. Nothing more then a Criminal Ring on the Inside,Where are the Publics Vote on these Terms on which was Settled behind closed Doors ?

  2. I lost my home to robo signing foreclosure. I have since moved of course and remarried. How can I ensure I get compensated.

  3. My home was foreclosed. I have since moved and remarried. How do I receive the compensation.

  4. Our original mortgage company was GMAC and was transferred to another mortgage company, then to another company. We finally had it refinanced from arm to fixed by Chase. Chase then transferred the mortage to Seterus(after we inquire about loan modification). We bought our property for 175,000 and now it’s assessed is only 49,000. WIth our scenario, since the current mortage company that handles our property is Seterus, but since both GMAC(original mrtgage) and CHASE (refinanced) were both involved with our property’s mortgage history, can we avail of this relief? Can we apply for principal reduction. We currently in default in our payment. Thanks

  5. This sounds pretty good if you still have a good job, but what about the rest of us who had a good job but had lost it do to the economy, going from 19.25 per hr. to 15.00 per hr. My wife and I have lost our home, and will loss our marrage. I will never buy a house again. Thank’s for all the help.

  6. I have been unemployed for over 1.5 years because my company closed. I would like to get a modification but my Mort. Co. won’t because “i am not behind in my payments”. Luckily I have been able to barely make my payments (using my credit cards for food, gas etc.) My unemployment is about to run out and that is when I will surely start to fall behind unless I can find a job or JOBS in time to cover such a large payment. Why do we have to choose between keeping our credit good by not falling behind OR falling behind on purpose (further risking foreclosure) in order to qualify for a modification when all other criteria has been met (loss of income/no fault, house not worth what is owed etc.etc.)

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  9. Well done america, that is good to hear that the federal government is doing all they can to help, the british government has alot to learn from you

  10. I would like to speak to someone about my Bank of America loan. My loan was with Countrywide. I fell one month behind because I was on short term disability, never with 15 years with Countrywide had I ever had a problem. I got a large amount of money for short term at one time. I called B of A, paid current, and tried to make 3 months advance payments. The gentleman I spoke with apparently didn’t know how to do that, but instead of telling me, he split the 3 months payments into 12 equal payments of $771.81 so it was applied to principle only. I struggled and fought 2 years to not lose my house. They still have 2 payments they have never applied. I have copied of the cashed checks. I do not qualify to lower my mortgage, but had no problem paying the bigger payment? I can’t get any help, they also have me paying PMI they owe me back this July because I had put down over 30% when I bought my home in 2004 and no one caught the fact PMI was on there. Please help. I have make 12 payments on time and want to refinance out of Bank of America.

    Thank you

    Susan Z

  11. I would like someone to know that I have had a HORRIBLE experience with CHASE bank trying to get help. When I started having trouble paying my mortgage, I contacted CHASE immediately asking for help. It has now been almost 10 months of information being requested and sent only to find out they “didn’t receive or can’t find it”. I have complied with everything they have asked me to do. It is insulting for them to treat a home owner this way.
    I recently sent them a letter voluntarily handing the house back over to them along with the keys. I had no other choice but to move to a rental unit. I have an aging mother with many medical conditions living with me and I had to do what I thought was best.
    I wish, somehow, that someone could truly be held accountable within this bank.
    The American Drean NO LONGER EXISTS!!!
    Thank you for listening.

  12. Seriously? Just how long did it take to come up with something that wouldn’t “offend” the banks or punish banks for massive fraud and theft that would send any citizen to a federal prison for life? The big banks destroyed this country while Congress looked the other way and continues to deny culpability, responsibility and insults the intelligence of the American people – we know exactly what happened, why it happened and that there are two systems for justice in the U.S. – one for the greedy rich and one for the rest of the nation.

    Thanks – but this piddly slap-in-the-face “settlement” is too little too late.

  13. I an not in forcloser yet put I have used up my life savings to keep my loan current. I am 71 and only get 600 ss plus a parttime job.I have talked to wells fargo for a year to no good they agreed to a short sale. why can’t they help me. why do I half to ruin my credit and go into forclouser befor I can get some help.

  14. I believe the settlement let the banks off the hook. I am currently in a wrongful foreclosure lawsuit with Wells Fargo Bank, Na. I have to move out of my house because I am acting as my attorney and didnt consolidate my cases.

    I found that Wells Fargo Bank, Na had the wrong trustee foreclosure on my property, then recorded a fraudulent document by backdating the substitution of trustee. They did not follow California foreclosure procedures, but yet they get off the hook, by paying people they illegal foreclosure on a $1-2000. When the settlement was signed I had 10 days to attempt to stay in my house why I fight the wrongful foreclosure in court, but could not get any help. My councilman office could help, the attorney general office could help and Hud couldnt help.

    Judges are either on the take or afraid to rule in the people favor because the court would be full with civil complaints.

    I even had one federal judge tell me yes Wells committed fraud but the fraud was to deceive them not you. What a joke.

    I have two days before I have to move, I have all my documents. Can anyone help me.

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