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April 6, 2012

Court Orders Finalize $25 Billion National Mortgage Servicing Settlement

Iowa consumers will soon see direct relief, new protections from $25 billion national settlement

(DES MOINES, Iowa)  A federal judge late Thursday ordered the nation's five largest mortgage servicers to comply with comprehensive new mortgage loan servicing standards, to provide substantial direct consumer relief and monetary payments, and to submit to an independent monitor, as part of a $25 billion national mortgage servicing joint state-federal settlement with Attorney General Tom Miller and the five largest mortgage servicers.

U.S. District Court Judge Rosemary M. Collyer approved and entered a series of court orders, called consent judgments, against Bank of America Corporation, JPMorgan Chase & Co., Wells Fargo & Company, Citigroup Inc., and Ally Financial Inc. (formerly GMAC).

The consent judgments follow a joint complaint filed March 12th by the U.S. Department of Justice and state attorneys general from 49 states and the District of Columbia, including Miller.

The complaint, based on a joint federal-state investigation, alleged that the servicers' misconduct "resulted in the issuance of improper mortgages, premature and unauthorized foreclosures, violation of service members' and other homeowners' rights and protections, the use of false and deceptive affidavits and other documents, and the waste and abuse of taxpayer funds."

The consent judgments formalize the settlement that was first announced February 9 at the U.S. Department of Justice in Washington, D.C., which involves the state attorneys general, the U.S. Justice Department, and the U.S. Department of Housing and Urban Development.  It is the largest joint state-federal settlement ever obtained.

“This is a great day for Iowa homeowners and a step forward for the nation’s housing market,” Miller said.  “This powerful set of federal court orders holds the banks accountable and begins to open the door to millions of dollars of relief that will go directly to Iowans," said Attorney General Tom Miller.  "The five largest mortgage servicers will soon have to start playing by a new set of rules, and that means borrowers will get strong new protections.”
Miller added that an independent monitor has already begun work to oversee the implementation of the anticipated formalized agreements and to ensure compliance.

Iowa’s estimated settlement benefits: nearly $40,000,000

  • Iowa borrowers will receive more than an estimated $5 million in direct benefits from loan term changes from the five servicers.  This type of financial relief includes significant principal reduction, where borrowers owe more on their mortgages than their homes are worth and are either delinquent or at imminent risk of default, along with a variety of other types of relief.
  • Iowa borrowers who lost their home to foreclosure from January 1, 2008 through December 31, 2011 and encountered servicing abuse could qualify for more than an estimated $7 million in payments to borrowers.  Potentially qualified borrowers should receive a written notification in several months.
  • The value of refinanced loans to Iowa’s current, underwater borrowers is more than an estimated $11 million.  This financial relief is for borrowers who are current on their mortgages but who owe more on their mortgages than their homes are worth, and whose loan is owned by one of the five banks.
  • The state will receive a direct payment of $14,651,922.  This payment will help fund the Iowa Mortgage Help Hotline; housing and foreclosure counseling efforts; Iowa Legal Aid; settlement implementation, public outreach and monitoring; and future enforcement.

National settlement: $25 billion

  • Servicers must provide a minimum of $20 billion in benefits directly to borrowers through a series of national homeowner relief effort options, including principal reduction.  Servicers will likely provide up to an estimated $32 billion in direct homeowner relief through a complex system of settlement credits. Servicers also fund an underwater mortgage refinancing program for current, but underwater borrowers.
  • Under an enhanced agreement with Bank of America, the company will write down principal on a large number of underwater homeowners to market value, which is in addition to its existing principal reduction obligations under the settlement.
  • Servicers pay $5 billion to the states and federal government ($4.25 billion to the states and $750 million to the federal government).
  • Homeowners receive comprehensive new protections from new mortgage loan servicing and foreclosure standards (see below).  Servicers will implement the new standards in phases over the next six months.
  • Service members receive new protections that go beyond the Servicemembers Civil Relief Act (SCRA).
  • An independent monitor will ensure mortgage servicer compliance (see below).
  • States preserve the right to pursue all criminal prosecutions and many civil claims, including claims regarding the packaging of mortgage loans into securities.
  • Borrowers and mortgage investors can pursue individual, institutional or class action cases without restriction.

New mortgage servicing standards
The five mortgage servicers will implement extensive new servicing standards, which take effect in three phases over the next two to six months:

  • Stop many past foreclosure abuses, such as robo-signing, improper documentation and lost paperwork through new mortgage servicing standards.
  • Require strict oversight of foreclosure processing, including of third-party vendors.
  • Impose new standards to ensure the accuracy of information provided in federal bankruptcy court,
    including pre-filing reviews of certain documents.
  • Make foreclosure a last resort, by requiring servicers to evaluate homeowners for other loan mitigation options first.
  • Restrict banks from foreclosing while the homeowner is being considered for a loan modification.
  • Set procedures and timelines for reviewing loan modification applications, and give homeowners the right to appeal denials.
  • Create a single point of contact for borrowers seeking information about their loans and adequate staff to handle calls.

National monitor begins work
Independent settlement monitor Joseph A. Smith, Jr. begins overseeing the terms of the finalized agreement and will help ensure compliance.  A monitoring committee comprised of state attorneys general, the U.S. Department of Justice, and the U.S. Department of Housing and Urban Development will oversee the monitor, who will prepare quarterly compliance reviews.

The U.S. Department of Justice and state attorneys general can enforce through the court process compliance with the servicing standards and the banks' financial obligations.  A federal judge may assess civil penalties for violations of the consent judgments.

Consumers urged to contact Iowa Mortgage Help Hotline, mortgage servicer, or Attorney General’s Consumer Protection Division
Miller urged borrowers who are currently behind on their monthly mortgage payment, or may soon experience financial trouble, to call the Iowa Mortgage Help Hotline at 1-877-622-4866 or go to  Borrowers are also urged to contact their mortgage servicer (see toll-free numbers below) for more information, and can also contact the Attorney General’s Consumer Protection Division.

Participating mortgage servicer consumer numbers:

Bank of America:




Wells Fargo:

More information will be made available as settlement programs are implemented, and consumers may need to wait before seeing direct benefits from the settlement.  The mortgage servicers are required to complete 75 percent of their consumer relief obligations within two years and 100 percent within three years.

For more information: (Phone: 515-281-5926 or 1-888-777-4590 outside of the Des Moines metro area) (Phone: 1-877-622-4866)

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