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In February 2012, 49 state attorneys general, the District of Columbia and the federal government announced a historic joint state-federal settlement with the country’s five largest mortgage servicers:
This bipartisan settlement has provided over $50 billion in:
- Relief to distressed borrowers in the states; and
- Direct payments to signing states and the federal government.
It’s the largest consumer financial protection settlement in US history.
The agreement settled state and federal investigations finding that the country’s five largest mortgage servicers routinely signed foreclosure related documents outside the presence of a notary public and without really knowing whether the facts they contained were correct. Both of these practices violate the law.
The settlement provides benefits to borrowers in the signing states whose loans are owned by the settling banks as well as to many of the borrowers whose loans they service. Borrowers from Oklahoma were not eligible for any of the relief directly to homeowners because Oklahoma elected not to join the settlement.
KEY PROVISIONS OF THE SETTLEMENT
Aid to homeowners needing loan modifications
Aid to borrowers who are current, but whose mortgages exceed their home’s value
Payments to borrowers who lost their homes to foreclosure You can contact the National Mortgage Settlement Administrator toll-free at 1-866-430-8358 with questions.
Immediate payments to signing states to help fund consumer protection and state foreclosure protection efforts.
First ever nationwide reforms to servicing standards; something that no other federal or state agency had previously been able to achieve. These servicing standards require single point of contact, adequate staffing levels and training, better communication with borrowers, appropriate standards for executing documents in foreclosure cases, ending improper fees, and ending dual-track foreclosures for many loans.
State AG oversight of national banks for the first time.
- National banks were required to regularly report compliance with the settlement to an independent, outside monitor that reports to state Attorneys General.
- Servicers had a duty 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
This agreement holds the banks accountable for their wrongdoing regarding residential mortgage foreclosures and mortgage servicing. This settlement does not seek to hold them responsible for all their wrongs over the years and the agreement and its release preserve legal options for others to pursue.
Specifically, this settlement does not:
- Release any criminal liability or grant any criminal immunity.
- Release any private claims by individuals or any class action claims.
- Release claims related to the securitization of mortgage backed securities that were at the heart of the financial crisis.
- Release claims against Mortgage Electronic Registration Systems or MERSCORP.
- Release any claims by a state that chooses not to sign the settlement.
- End state attorneys general investigations of Wall Street related to financial fraud or the financial crisis.
The agreement settles only some aspects of the banks conduct related to the financial crisis (foreclosure practices, loan servicing, and origination of loans) in return for the second largest state attorneys general recovery in history and direct relief to distressed borrowers while they can still use it.