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In a perfect world, state attorneys general and the U.S. Department of Justice would have worked hand in hand with bank regulators to fix foreclosure wrongs. But that's not how the world works.
February 21 -
Is the right way to hold banks accountable for servicing errors to require them to disgorge funds to borrowers who themselves may have been equally complicit in the process of helping to create mortgage fraud?
February 20 -
While the industry waits to see the final, detailed terms of the mortgage servicing settlement, officials released two documents Tuesday summarizing the highlights of the deal.
February 14 -
More than a day after the announcement of a mammoth national mortgage servicing settlement, the actual terms of the deal still aren't public. That's because a fully authorized, legally binding deal has not been inked yet.
February 10 -
Multiple state and federal officials put the banks on notice that the $25 billion mortgage servicing settlement is just the first step in pursuing civil litigation and criminal prosecutions in connection with misdeeds before, during and after the financial crisis.
February 9
WASHINGTON — The U.S. government and 49 states filed a $25 billion settlement of alleged foreclosure abuses in federal court on Monday, capping a year of negotiations with five major banks after public outrage erupted in fall 2010 over revelations that banks cut corners when processing foreclosures.
The government filed the landmark settlement, which had been announced last month, in U.S. District Court for Washington, D.C. It was signed by five major mortgage companies — Ally Financial Inc., Bank of America Corp. (BAC), Citigroup Inc. (C), JPMorgan Chase & Co. (JPM) and Wells Fargo & Co (WFC).
Under the agreement, Joseph Smith, North Carolina's former top banking regulator, will issue quarterly reports that offer a detailed look at banks' progress in upgrading their mortgage-servicing operations to comply with a new 42-page set of standards. Smith, the official monitor for the foreclosure settlement, will also be able to seek fines against banks that fail to meet their consumer-assistance targets, according to the settlement documents.
Of the $25 billion settlement, around $5 billion will be paid as fines, and another $3 billion will be used to help homeowners refinance. Consumers who were foreclosed upon between 2008 and the end of last year will be paid a total of $1.5 billion, or around $1,500 to $2,000 per borrower.
To pay the remaining $17 billion, banks will receive credits for helping troubled borrowers, of which $10 billion goes toward cutting loan balances for borrowers who owe more than their homes are worth.
The government charged the banks with eight counts of violating federal and state foreclosure and lending laws, outlining the most detailed allegations to date that banks failed to follow the law when foreclosing on homeowners.
The banks did not admit to the charges, which include: charging improper fees to homeowners who fell behind on their loans, failing to provide proper documentation for foreclosures, losing paperwork after consumers asked for loan assistance and wrongfully denying consumers who asked for help.
The government also alleged that banks failed to follow the law in federal bankruptcy cases and violated a federal law protecting active duty military members from foreclosures. Nevertheless, federal officials say that so-called "robo-signing"--in which banks used employees to process foreclosure documents without validating their contents--didn't result in many cases of banks foreclosing on homeowners who had not missed mortgage payments.
Oklahoma Attorney General Scott Pruitt was the only state official who didn't sign on to the agreement, arguing it represented an overreach of state authority. The settlement came after a long and sometimes contentious process that involved state and federal officials and the nation's largest banks and White House officials.
Housing and Urban Development Secretary Shaun Donovan has said the settlement will provide about 1 million homeowners with loan write-downs. However, others believe that the results will be more limited. The complex set of requirements set out in the settlement mean that about 500,000 borrowers, or 5% of those who are underwater, may be eligible for help according to estimates from Ted Gayer, co-director of economic studies at the Brookings Institution.
Many more Americans, however, owe more on their properties than their homes are worth. CoreLogic, a real estate data provider, estimates that 11.1 million, or 22.8%, of American households with a mortgage were "under water" at the end of last year.
Bank of America has by far the largest share of the settlement, at nearly $2.4 billion in cash payments, plus $7.6 billion worth of aid to troubled consumers and nearly $950 million in refinancing aid. Bank of America also reached a $1 billion settlement to resolve allegations that Countrywide Financial, which it acquired in 2008, issued loans to borrowers who did not qualify for mortgage backed by the Federal Housing Administration, the government-run mortgage insurer.
JPMorgan is paying the second-largest share, at $1.1 billion in cash, plus $3.7 billion of aid to troubled homeowners and nearly $540 million in refinancing help. Wells Fargo is paying $1 billion in cash, plus $3.4 billion worth of assistance to troubled homeowners and $900 million in refinancing aid.
Citi is paying $413 million in cash, plus $1.4 billion in assistance to homeowners and $378 million in refinancing relief. Ally is making a cash payment of about $110 million, plus $185 million in consumer relief and $15 million in refinancing aid.
