After more than a year of wrangling the nation’s five largest banks have reached an agreement to settle charges of abusive and negligent foreclosure practices. The initial complaint was brought forth by a group of state’s attorney generals who claimed banks lost important paperwork and enlisted robo-signers to attest to facts on hundreds of documents a day. The unprecedented joint agreement is the largest federal-state civil settlement ever obtained.
The settlement provides up to $25 billion in relief to distressed borrowers who may have been affected and directs payments to states and the federal government. The banks and servicers have committed at least $17 billion to reduce principal for borrowers who 1) owe far more than their homes are worth 2) are behind on payments. Unfortunately, not included in the deal are mortgages owned or backed by Fannie Mae and Freddie Mac.
Key components of the settlement are listed below and no doubt will have an impact on the supply of foreclosure inventory in the future.
• The settlement also prohibits robo-signing, improper documentation and lost paperwork. Banks must review foreclosure documents individually as the law requires. Financial institutions must communicate with mortgage holders, reducing delays in the loan-modification process.
• The agreement makes foreclosure the last resort by requiring servicers to evaluate homeowners for other loss mitigation.
• Banks will be restricted from foreclosing while the homeowner is being considered for a loan modification.
The entire settlement document is now available online for review and can be accessed by clicking here. Feel free to forward our post to any of your current or past transferees you think may benefit from the settlement.