Last Thursday, the nation’s five largest mortgage servicers agreed to a landmark $25 billion settlement with a coalition of state attorneys general and federal agencies. The settlement addresses past mortgage loan servicing, foreclosure abuses and fraud, provides substantial financial relief to borrowers harmed by bank fraud, and establishes significant new homeowner protections for the future.
The joint state-federal group announced the agreement with the nation’s five largest servicers: Bank of America Corporation, JPMorgan Chase & Co., Wells Fargo & Company, Citigroup, Inc., and Ally Financial, Inc. (formerly GMAC). Collectively, the five banks service nearly 60 percent of the nation’s mortgages.
Under the agreement, the five servicers agree to:
- Commit a minimum of $17 billion 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.
- Commit $3 billion to an underwater mortgage refinancing program.
- Pay $5 billion to the states and federal government ($4.25 billion to the states and $750 million to the federal government).
- Provide homeowners with comprehensive new protections from new mortgage loan servicing and foreclosure standards.
- An independent monitor will ensure mortgage servicer compliance.
- States can pursue civil claims outside of the agreement including securitization claims as well as criminal cases.
- Borrowers and investors can pursue individual, institutional or class action cases regardless of agreement.