News of a settlement between forty nine state attorneys general (Oklahoma did not join the settlement), the federal government, and five leading mortgage lenders, was released on Thursday, February 9. The settlement purports to resolve the investigation of lenders for the pervasive practice of “robo-signing” foreclosure-related documents. The deal, which will not be final until it receives court approval, promises approximately $25 billion in relief for distressed borrowers as well as funds to state and federal governments. The agreement is expected to benefit millions of homeowners by reduction of loan principal for delinquent borrowers, or refinancing of loans to non-delinquent borrowers whose homes are underwater. The agreement also provides for compensation to victims of foreclosure abuses. The settling banks include; Ally/GMAC, Bank of America, Citigroup, JPMorgan Chase, and Wells Fargo. Although the final agreement is not yet available, a summary of its contents can be found at http://www.nationalmortgagesettlement.com/states
The document includes four main clauses:
Return Integrity & Accuracy to Foreclosure & Bankruptcy Proceedings:
1) Requires compliance with laws and rules already in place relating to signing and notarizing documents.
2) Eliminates financial incentives to rapidly process mortgage and foreclosure documents.
3) Provides for pre-foreclosure notice to borrowers with additional information concerning account history, identification of current holder of Note and Mortgage.
4) Creates standards for maintaining borrower’s accounts including rules relating to information included in monthly billing statements and application of payments.
5) Increases lender accountability for foreclosure documents delegated to third parties.
Enhance Loss Mitigation Protection for the Borrower
1) Creates rules geared toward making loan modification a viable alternative including affording the borrower access to information regarding the status of the modification request, reasons for denial, and opportunity to appeal the denial.
2) Requires that the lender assign a “Single Point of Contact” for communication with the distressed borrower.
Restrictions on Servicing Fees
1) Requires transparency of late fee charges.
2) Restricts inspection fee charges.
3) Designates rules for force-placed insurance.
Measures to Deter Community Blight
1) Places burden on servicer to cooperate with state and local land bank services to prevent abandoned homes from becoming nuisances when the servicer decides to release the lien rather than foreclose.
Bank of America has apparently reached an additional settlement agreement relating to a separate lawsuit with Nevada’s Attorney General which promises to set aside $750 million for lien reductions and short sales to benefit home owners in Nevada.
For more information on this agreement, see: http://www.bloomberg.com/news/print/2012-02-09/bank-of-america-nevada-s-masto-reach-foreclosure-mortgage-settlement.html
Tags: Mortgage Settlement
