- 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.
$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.
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.”
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.
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|
|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|
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.
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)."
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|
|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|
Mortgage servicers ask homeowners to contact their distressed home loan Web page.
Bills.com will continue to report on this settlement on this page.
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