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National Mortgage Settlement

Foreclosure

Updated: Feb 9, 2012

Highlights

  • The settlement aids owners of upside-down homes.
  • Foreclosed homeowners will receive $2,000.
  • Homeowners with Fannie Mae or Freddie Mac loans do not qualify.
3.5
/5.0
(23 Votes)

$25 Billion National Mortgage Settlement Announced by 49 States & 5 Mortgage Servicers

Attorney General Eric Holder, Department of Housing and Urban Development (HUD) Secretary Shaun Donovan, Iowa Attorney General Tom Miller and other federal and state officials announced a plan to provide about $25 billion in mortgage relief and aid to homeowners. The settlement is designed to help homeowners teetering on the brink of foreclosure, and former homeowners who were foreclosed upon contrary to their state’s laws.

Editor's note

In early January 2013, in a separate announcement, 10 mortgage servicers agreed to spend $3.3 billion in direct payments to eligible borrowers and $5.2 billion in loan modifications and forgiveness of deficiency judgments. The Independent Foreclosure Review is separate from the national Mortgage Settlement. The Federal Reserve estimates more than 3.8 million borrowers whose homes were in foreclosure in 2009 and 2010 will receive compensation ranging from hundreds of dollars up to $125,000. The servicers also agreed to speed up payments to eligible borrowers.

In a February 2012 press conference, Holder said the settlement “reflects our commitment at both the federal and state levels to ensure justice and to recover losses for victims of reckless and abusive mortgage practices.”

Note

The deadline to apply for the National Mortgage Settlement is January 18, 2013. Go to the National Mortgage Settlement Claim Filing Site to start the online process. (Editor’s note: Contact the National Mortgage Settlement Administrator at 1-866-430-8358 for claim information.) This is a no-cost service supervised by the Attorneys General who negotiated the settlement and the Federal Reserve.

The settlement will write down principal payments for homeowners who were not foreclosed upon when the mortgage bubble burst, but who struggle now. Banks will have targets they have to meet, in terms of what kinds of loans they must modify, but will still have a lot of discretion in choosing which homeowners qualify and for how much.

Editor's note

In early January 2013, Bank of America agreed to pay Fannie Mae $3.6 billion and repurchase $6.75 billion in residential mortgage loans it sold to Fannie Mae from 2000 through 2008. The company also sold the mortgage servicing of 2 million loans, 775,000 of which are 60+ days passed due.

Homeowners who have been wrongfully foreclosed will get up to $2,000.

Five mortgage servicers signed the 2012 deal, but more may follow.

Servicer Total Amount Serviced in 2011 Market Share Contribution to Settlement
Source: Inside Mortgage Finance, Bills.com, New York Times. The five banks signing the national mortgage settlement service about half of all US home loans.
Wells Fargo $1.82 trillion 17.7% $5.4 billion
Bank of America $1.77 trillion 17.2% $11.8 billion
JPMorgan Chase & Co $1.17 trillion 11.4% $5.3 billion
Citigroup $600 billion* 5%* $2.2 billion
GMAC/Ally Financial $300 billion* 3%* $310 million
* Bills.com estimate

These five are the largest mortgage servicers in the US, and service about half of all US home loans. A mortgage servicer collects monthly payments from homeowners on behalf of the investors who lent money for home loans. The New York Times reported that nine other major mortgage servicers may agree to the settlement, which would raise its total amount to $30 to $45 billion.

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The national mortgage settlement will cover the mortgage servicers against any lawsuits regarding the robo-signing issue, where mortgage companies signed false affidavits to speed up the foreclosure process.

The federal government and the 49 state attorneys general who signed the deal published a National Mortgage Settlement Web site that contains information about the agreement. Oklahoma did not join the settlement, and as a result its homeowners are not eligible.

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6 Key Points of the National Mortgage Settlement

The six points of the plan include principal reduction, refinancing, $2,000 to foreclosed homeowners, payments to the 49 states, promises to improve mortgage servicing, attorney general oversight of national banks.

1. Principal Reduction

The servicers are required to write down up to $17 billion in principal reduction and "other forms of loan modification relief." First and second loans are included in principal reduction. The National Mortgage Settlement Web site states that "principal reduction is one effective tool in combating foreclosure and that it will not lead to widespread defaults by borrowers who really can afford to pay (their home loans)."

2. Refinancing

The servicers will have to provide up to $3 billion in refinancing.

3. $2,000 to Foreclosed Homeowners

$1.5 billion will be distributed nationwide to 750,000 borrowers who lost their homes to foreclosure between January 1, 2008, and December 31, 2011. This equals $2,000 per foreclosed homeowner. Significantly, accepting the $2,000 will not release private claims against the servicers.

4. Payments to the 49 States

$5 billion will be paid to each of the 49 states participating in the deal. (Oklahoma is the lone holdout.) Under the agreement, $4.25 billion the states includes $1.5 billion for payments to borrowers who lost their home to foreclosure by one of the five servicers, as mentioned above. The payment to borrowers addresses servicing and foreclosure abuses from January 1, 2008 to December 31, 2011.

5. Promises to Improve Mortgage Servicing

According to the National Mortgage Settlement Web site, the five mortgage servicers promised to

  • Create a single point of contact for customers
  • Staff and train mortgage service departments adequately
  • Communicate better with borrowers
  • Set appropriate standards for executing documents in foreclosure cases
  • End improper fees
  • End dual-track foreclosures for many loans

These promises to improve servicing are outlined in a Servicing Standards Highlights (pdf) document.

6. Attorney General Oversight of National Banks

The servicers must:

  • Report compliance with the settlement to an independent, outside monitor
  • Pay penalties for non-compliance with the settlement, including missed deadlines

Editor's note: The January 2013 agreement between the Federal Reserve and the 10 largest mortgage servicers ceased the Independent Foreclosure Review. The Federal Reserve said the case-by-case review process was taking too long, and the 2013 agreement replaces it with a "broader framework" and, "Eligible borrowers will receive compensation whether or not they filed a request for review form, and borrowers do not need to take further action to be eligible for compensation."

How to Apply for the National Mortgage Settlement

Up to 2 million homeowners could benefit under the national mortgage settlement agreement. Are you one who qualifies? The National Mortgage Settlement Web site offers this disappointing answer:

Because of the complexity of the mortgage market and this agreement, which will be performed over a three-year period, borrowers will not immediately know if they are eligible for relief...

As mentioned, Oklahoma homeowners are not eligible. Neither are homeowners whose mortgages are held by Fannie Mae or Freddie Mac. To learn if your loan is owned by either, check the Fannie Mae or Freddie Mac mortgage look-up tools.

The five mortgage servicers say they will spend the next six to nine months deciding which homeowners are eligible, and say they will contact them with details. At present, the servicers are directing past and present homeowners who may benefit from the national mortgage settlement to their distressed borrower Web pages and telephone numbers. These are listed in the table below.

Servicer Telephone Distressed Home Loan Web Page
Mortgage servicers ask homeowners to contact their distressed home loan Web page.
Wells Fargo (800) 288-3212 Help for Homeowners
Bank of America (877) 488-7814 Home Loan Assistance
JPMorgan Chase & Co (866) 372-6901 Homeownership Center
Citigroup (866) 272-4749 Homeowner Assistance
GMAC/Ally Financial (800) 766-4622 Homeowner Assistance

Bills.com will continue to report on this settlement on this page.

3.5
/5.0
(23 Votes)

32 Comments

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  • BS
    Jun, 2013
    Brad
    The date for the distribution of checks to borrowers who submitted valid claims has been set. Checks will begin mailing on June 10 and will be completed by June 17, 2013, and the payment amount for each loan is approximately $1,480. The exact amount is not being released to help prevent fraud. Please allow time for delivery of payments. The Settlement Administrator cannot provide specific mail dates for individual borrowers at this time.
    1 Votes

  • TF
    May, 2013
    T
    If the funds were released from the banks - who is getting the interest for holding onto and not releasing the funds to the foreclosed consumers? Are the consumers being paid any portion of the monthly interest from the months of holding onto these funds? How is $2000 a acceptable amount after invalid foreclosure proceedings - leaving hundreds of thousands of American families homeless? Some of these families never even missed a single payment - however, servicing banks lost track of their accounting and misappropriated funds. The states, receiving a great deal of the funds allotted for this settlement - ESPECIALLY GEORGIA - FAILED TO ASSIST THESE FAMILIES UNTIL MONEY FROM THIS SETTLEMENT WAS IN SIGHT! Even then - Georgia doesn't help victims of bank fraud and they certainly have their greedy hands out to "publicize" that they somehow assisted families left homeless! How can anyone effected from this tragedy reconcile the recovery of every dollar - is the accounting public? I would greatly appreciate the opportunity to see spreadsheets made public - which includes interest paid for this money to sit "stagnant" in whatever bank account is holding these funds! Is that a fair request?
    9 Votes

  • DB
    May, 2013
    Derek
    I was told that over 2 million claim forms were sent out for the national mortgage settlement. That is why the amount is $840 and why it could vary.
    0 Votes

  • WW
    May, 2013
    wanda
    I, too, was foreclosed on after my husband passed away. I tried for many home loan mods but just got the run around. I guess I don't understand how we get $2,000 after we lost our home that we paid $75,000. I would also like to know if anyone knows of a lawsuit going on. Please let me know.
    0 Votes

  • BS
    May, 2013
    Brad
    The website was updated again today May 8, 2013. This update removed the sentence that National Mortgage Settlement payments would be sent out mid to late May which was added with the April 22, 2013 update and now reads, the again vague expected to be mailed mid-2013. They have no idea when these payments will be sent.
    15 Votes