NATIONAL SETTLEMENT: The agreement settles state and federal investigations finding that the country’s five largest loan 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.
- Bank of America
- JPMorgan Chase
- Wells Fargo
The five banks will provide at least $25 billion in consumer relief. The money in the settlement will be distributed in several ways:
- • At least $17 billion in principal reduction and loan modification for homeowners who are in trouble and need help to avoid foreclosure.
- Up to $3 billion in refinancing for “underwater” homeowners who are current on their mortgages but owe more than their homes’ current market value.
- $1.5 billion in payments to homeowners who lost their homes to foreclosure between Jan. 1, 2008 and Dec. 31, 2011. These recipients will have to complete a simple form, and they will not have to drop any legal claims they may have.
- Payments to the 49 signing states include efforts to support the prevention of foreclosure as well as consumer protection and education programs, and for civil penalties.
Approximately $1.5 billion of the National Mortgage Settlement funds will be allocated to provide compensation to borrowers:
- • With loans services by the any of the five loan servicers.
- Who were foreclosed on after January 1, 2008 and December 31, 2011.
Borrowers who were not properly offered loss mitigation or who were otherwise improperly foreclosed on will be eligible for a uniform payment of approximately $2,000 per borrower depending on the level of response. Borrowers who receive payments will not have to release any claims and will be free to seek additional relief in the courts. Borrowers may also be eligible for a separate restitution process administered by the federal banking regulators.
The banks will notify eligible borrowers of their right to file a claim over the next six to nine months.
ADDITIONAL BANK OF AMERICA NEVADA SETTLEMENT:
In addition to the $1.5 billion allocated to Nevada, the AG settled an additional lawsuit with Bank of America creating an additional $750 million in first and second lien principal reductions and short sales. It further requires Bank of America to suspend its foreclosure sales of any borrower eligible for the National Homeownership Retention Program, solicit eligible homeowners, fund an aggressive outreach effort to ensure that borrowers are made aware of the relief available to them and pay $30 million to the State of Nevada for consumer protection efforts.
Lenders will get credit.
Concept of foreclosures are going away because lenders will get credit offsets for principle reductions, waivers of deficiencies against the 1.5B liability.
One example of how banks are given incentive to cooperate is that for every dollar a bank waives on a second, that bank receives 90 cents on the dollar credit toward the settlement amount they owe. For every dollar a bank waives on a first, the receive a 45 cent credit.
Essentially banks can cooperate with homeowners, or pay the fine directly to the State of Nevada. Banks are opting to work with homeowners.