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State of Rhode Island: Office of the Attorney General Peter Kilmartin
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Home> Joint State-Federal Mortgage Servicing Settlement
For more information on the National Mortgage Settlement, please visit:
www.NationalMortgageSettlement.com
Attorney General Peter F. Kilmartin reported on the progress made by the nation’s five largest mortgage service providers to assist Rhode Island homeowners under the National Mortgage Settlement. According to data provided by the five banks that are parties to the Settlement, through March 31, 2013, approximately 2,064 homeowners in Rhode Island have received relief in the form of first and second lien modification forgiveness, short sales, principal refinancing and other forgiveness programs, with an aggregate amount of relief/benefit or $150 million, or $72,708 average benefit per homeowner.
The report also shows that there are approximately 1,000 additional homeowners who are currently in the approval and/or trial phase of first lien modification relief programs.
According to the reports filed with Joseph A. Smith, Jr., Monitor of the National Mortgage Settlement, nationally 621,712 borrowers benefited from some type of consumer relief totaling $50.63 billion, which, on average, represents about $81,437 per borrower. This figure includes both completed Consumer Relief and active first lien trial modifications.
Consumer Relief Highlights
In June the Monitor also plans to submit his first required reports to the Court concerning his review of the banks’ compliance with the Settlement’s servicing standards. The Monitor is also developing one or more discretionary metrics, or tests, to better measure the banks’ performance on certain servicing standards. These new metrics are expected to be announced and implemented later this summer.
This information is self-reported by the banks and will not be credited under the Settlement until each bank requests a review from the Monitor; to date, only the ResCap parties (formerly GMAC) have received credit.
While this report shows real relief for many homeowners in Rhode Island and recent data show some recovery, the housing market continues to be very fragile, heavily reliant on the state’s overall economy and employment levels. According to the most recent HousingWorks RI's analysis of Warren Group Data, 1,617 residential foreclosure deeds were filed in Rhode Island during 2012, representing a 23 percent decline from the previous year, and 43 percent decline from 2009.
Based on calls from frustrated homeowners, Attorney General Kilmartin knows there are areas in which some of the banks still have work to do to be in compliance with the servicing standards outline in the Settlement. The Office continues to report these issues to the Monitor, and Attorney General Kilmartin will continue to hold the banks accountable and ensure they are in full compliance with the terms of the settlement. Attorney General Kilmartin continues to believe there is no one answer to righting the housing market. Just as it took a series of changes in financial regulations over many years to bring the market to its knees, it will take time and a series of reforms to bring it back from the brink.”
Attorney General Kilmartin has proposed legislation to bring more relief to Rhode Island homeowners through a foreclosure conciliation program and statutory changes to the Mortgage Electronic Registration Systems, Inc. in Rhode Island. H5335/S0416 would require a mortgage servicer to participate, in good faith, in a conciliation conference prior to initiating foreclosure proceedings against a homeowner.
H5512/S0547 would end the practice of having the vast majority of mortgages held in the name of a private registry with no interest in the loans known as Mortgage Electronic Registration Systems, Inc., or “MERS,” and require that all transfers of a mortgage interest on residential property be recorded to provide a clean chain of title. The legislation would make it easier for borrowers and regulators to determine who owns loans secured by mortgages on Rhode Island property. Borrowers facing foreclosure will be able to more easily discover who owns their loans before it is too late, and municipalities will be able to identify lenders who are responsible for abandoned homes.
Background
On Thursday, April 5, 2012, a federal judge ordered the nation's five largest mortgage servicers to comply with comprehensive new mortgage loan servicing standards, to provide substantial direct consumer relief and monetary payments, and to submit to an independent monitor, as part of a $25 billion national mortgage servicing joint state-federal settlement with 49 attorneys general and the five largest mortgage servicers.
U.S. District Court Judge Rosemary M. Collyer approved the court orders, called Consent Judgments, against Bank of America Corporation, JPMorgan Chase & Co., Wells Fargo & Company, Citigroup Inc., and Ally Financial Inc. (formerly GMAC).
The Consent Judgments follow a joint complaint, filed March 12th, by the U.S. Department of Justice and state attorneys general from 49 states and the District of Columbia, including Rhode Island.
The complaint, based on a joint federal-state investigation, alleged that the servicers' misconduct "resulted in the issuance of improper mortgages, premature and unauthorized foreclosures, violation of service members' and other homeowners' rights and protections, the use of false and deceptive affidavits and other documents, and the waste and abuse of taxpayer funds."
The Consent Judgments formalize the settlement that was first announced February 9th at the U.S. Department of Justice in Washington, D.C., which involves the state attorneys general, the U.S. Justice Department, and the U.S. Department of Housing and Urban Development. It is the largest joint state-federal settlement ever obtained.
Settlement Documents
Complaint (pdf)
Ally/GMAC Settlement (pdf)
Bank of America Settlement (pdf)
Citi Settlement (pdf)
JP Morgan Chase Settlement (pdf)
Wells Fargo Settlement (pdf)
National Settlement: $25 billion
- Servicers must provide a minimum of $20 billion in benefits 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 through a complex system of settlement credits. Servicers also fund an underwater mortgage refinancing program for current, but underwater borrowers.
- Under an enhanced agreement with Bank of America, the company will write down principal on a large number of underwater homeowners to market value, which is in addition to its existing principal reduction obligations under the settlement.
- Servicers pay $5 billion to the states and federal government ($4.25 billion to the states and $750 million to the federal government).
- Homeowners receive comprehensive new protections from new mortgage loan servicing and foreclosure standards. Servicers will implement the new standards in phases over the next six months.
- Service members receive new protections that go beyond the Servicemembers Civil Relief Act (SCRA).
- An independent monitor will ensure mortgage servicer compliance.
- States preserve the right to pursue all criminal prosecutions and many civil claims, including claims regarding the packaging of mortgage loans into securities.
- Borrowers and mortgage investors can pursue individual, institutional or class action cases without restriction.
New Mortgage Servicing Standards
The five mortgage servicers will implement extensive new servicing standards, which take effect in three phases over the next two to six months:
- Stop many past foreclosure abuses, such as robo-signing, improper documentation and lost paperwork through new mortgage servicing standards.
- Require strict oversight of foreclosure processing, including of third-party vendors.
- Impose new standards to ensure the accuracy of information provided in federal bankruptcy court, including pre-filing reviews of certain documents.
- Make foreclosure a last resort, by requiring servicers to evaluate homeowners for other loan mitigation options first.
- Restrict banks from foreclosing while the homeowner is being considered for a loan modification.
- Set procedures and timelines for reviewing loan modification applications, and give homeowners the right to appeal denials.
- Create a single point of contact for borrowers seeking information about their loans and adequate staff to handle calls.
Consumers Urged to Contact Mortgage Servicer
Attorney General Kilmartin urges borrowers who are currently behind on their monthly mortgage payment, or may soon experience financial trouble, to call their mortgage servicer (see toll-free numbers below) for more information.
Participating Mortgage Servicer Consumer Numbers
Bank of America: 1-877-488-7814
Citigroup: 1-866-272-4749
Chase: 1-866-372-6901
Ally/GMAC: 1-800-766-4622
Wells Fargo: 1-800-288-3212
More information will be made available as settlement programs are implemented, and consumers may need to wait before seeing direct benefits from the settlement. The mortgage servicers are required to complete 75 percent of their consumer relief obligations within two years and 100 percent within three years.
For More Information:
www.NationalForeclosureSettlement.com
Joint State-Federal Mortgage Servicing Settlement FAQ
Background
The settlement between state attorneys general, the federal government and the five leading bank mortgage servicers will result in significant monetary sanctions and relief nationally. The settlement agreement includes enhanced loan modifications, principle reductions and refinancing packages. It will also fund payments to victims of unfair foreclosure practices.
In addition to the monetary allocations, the settlement requires comprehensive reforms of mortgage loan serving. The new, mandated standards will cover all aspects of mortgage servicing, from consumer response to foreclosure documentation.
Financial relief for Rhode Island homeowners
- Aid to homeowners needing loan modifications now , including first and second lien principal reduction. The servicers are required to work off up to $152 million in principal reduction and other forms of loan modification relief in Rhode Island.
- Aid to borrowers who are current, but underwater. Borrowers will be able to refinance at today’s historically low interest rates. Servicers will have to provide up to $7.2 million in refinancing relief in Rhode Island.
- Payments to borrowers who lost their homes to foreclosure with no requirement to prove financial harm and without having to release private claims against the servicers or the right to participate in the OCC review process. The settlement allots $3.1 million for direct payments to those who lost their homes to foreclosure.
- Payments to signing states $8.5 million to the State of Rhode Island to help fund consumer protection and state foreclosure protection efforts.
The settlement follows months of intensive negotiations between the participating banks and a collation of state attorneys general and federal agencies, including the US Dept. of Justice, Treasury and Housing and Urban Development (HUD).
While robo-signing received the most attention, the investigation identified other servicer-related problems, including deceptive practices in the offering of loan modifications (i.e. telling consumers that a loan modification was imminent while simultaneously foreclosing). The performance failures resulted in more than just poor customer service. Unnecessary foreclosures occurred due to failure to process homeowners’ requests for modified payments and shoddy documentation leading to protracted delays.
While the proposed settlement does not put total blame on the five bank mortgage servicers, or mortgage servicers in general, for the nation’s housing crisis, the misconduct by these servicers threatened the integrity of the legal system and had a significant negative impact on communities and the housing market.
What issues does the mortgage foreclosure settlement agreement address?
The proposed settlement primarily seeks to:
- Provide immediate relief to enable struggling homeowners to avoid foreclosure
- Bring badly needed reform to the mortgage servicing industry
- Ensure that foreclosures are lawfully conducted
- Penalize the banks for past misconduct
What mortgage service providers are subject to this settlement?
This settlement involves the nation’s five largest mortgage servicers, including Ally, Bank of America, Citi, JPMorgan Chase and Wells Fargo.
How do know if I am eligible for one of the programs offered by the settlement agreement?
Distressed homeowners and Rhode Islanders who have gone through the foreclosure process may be eligible for assistance if their mortgage service provider is a party to the multistate agreement.
There are many details that still need ironing out. In the very near future, mortgage service providers will set up a toll free number and a website to assist homeowners through the process.
Nationwide reforms to servicing standards
These servicing standards require single point of contact, adequate staffing levels and training, better communication with borrowers, and appropriate standards for executing documents in foreclosure cases, ending improper fees, and ending dual-track foreclosures for many loans.
Treating homeowners fairly
- Stops many past foreclosure abuses, such as robo-signing, improper documentation and lost paperwork through new mortgage servicing standards.
- Requires strict oversight of foreclosure processing.
- Mortgages servicers will have to evaluate homeowners for other loan mitigation options first, making foreclosures a last resort.
- Restricts banks from foreclosing while the homeowner is being considered for a loan modification
- Sets procedures and timelines for reviewing loan modification applications, and gives homeowners the right to appeal denials.
- Creates a single point of contact for borrowers seeking information about their loans and adequate staff to handle calls.
- These tough new standards will be enforced by court order and overseen by an independent monitor.
How does this settlement hold the banks accountable?
The banks will be subject to a federal court order enforceable by a federal judge. In addition, a special independent monitor will have the authority to oversee the banks and require their compliance. Federal agencies and state attorneys general can enforce compliance if there are violations.
The agreement and its release preserve legal options for others to pursue. Governmental entities and private parties are aggressively pursuing securities cases against the banks. A joint federal-state task force has been formed to investigate and prosecute those responsible for the collapse of the mortgage lending and investment markets.
Will this settlement fix the entire mortgage industry breakdown?
No. This is a mortgage servicing settlement that addresses only a portion of the mortgage lending system. However, the settlement’s new mortgage servicing standards will have a widespread impact on future mortgage loan servicing.
State and federal efforts to investigate wrongdoing in the housing market continue. On January 27, 2012, U.S. Attorney General Eric Holder along with Housing and Urban Development (HUD) Secretary Shaun Donovan, Securities and Exchange Commission (SEC) Director of Enforcement Robert Khuzami and New York Attorney General Eric Schneiderman announced the formation of the Residential Mortgage-Backed Securities Working Group. The working group will investigate those responsible for misconduct contributing to the financial crisis through the pooling and sale of residential mortgage-backed securities.
In addition, this agreement does not release any institution for claims related to securitization of mortgage instruments. Attorney General Kilmartin has met and discussed this issue with the Attorneys General of New York and Delaware who are leading investigations into those claims, and will continue to monitor those developments closely to determine if Rhode Island should become party to their respective actions.
Why don’t you sue the banks and try to get even more money?
If Rhode Island did not sign on, we would give up all the funds designated specifically for their state and its citizens who were foreclosure victims. In addition, homeowners of those states would also only qualify for a significantly reduced amount of loan modification and other benefits being distributed as part of the settlement’s national programs.
While Rhode Island would be free to pursue our own legal actions against mortgage service providers, litigation could take years with no guarantee of success or relief for homeowners.
Moreover, there are significant legal hurdles Rhode Island would have to overcome. First, federal law and US Supreme Court precedent hold that a state attorney general cannot subpoena a national bank. Investigating these banks without federal help would be very difficult.
Second, many of these acts are beyond the jurisdiction of the Office of Attorney General in that our authority under the Deceptive Trade Practices Act has been severely limited by the Rhode Island Supreme Court under the Piedmont decision. In addition, potential claims that are being released could be barred by the statutes of limitations or be against entities that no longer exist.
Will taxpayers ultimately pay for this settlement?
No, the settlement is not funded by taxpayer dollars.
Does this immunize banks from prosecution?
No. This settlement does not release any bank from criminal acts. It does not release any institution for claims related to securitization of mortgage instruments. Attorney General Kilmartin has met and discussed this issue with the Attorneys General of New York and Delaware who are leading investigations into those claims, and will continue to monitor those developments closely to determine if Rhode Island should become party to their respective actions.
In addition, state and federal efforts to investigate wrongdoing in the housing market continue. On January 27, 2012, U.S. Attorney General Eric Holder along with Housing and Urban Development (HUD) Secretary Shaun Donovan, Securities and Exchange Commission (SEC) Director of Enforcement Robert Khuzami and New York Attorney General Eric Schneiderman announced the formation of the Residential Mortgage-Backed Securities Working Group. The working group will investigate those responsible for misconduct contributing to the financial crisis through the pooling and sale of residential mortgage-backed securities.
Why doesn’t this settlement deal with the banks’ conduct in securitizing loans?
Nothing in this settlement prevents attorneys general or others from investigating, pursuing legal action, or seeking settlements related to securities.
How will I know whether this settlement affects my situation?
Because of the complexity of the mortgage market and this agreement, which will be performed over a three year period, borrowers may not immediately know if they are eligible for relief. For loan modifications and refinance options, borrowers may be contacted directly by one of the five participating mortgage servicers. For payments to foreclosure victims, a settlement administrator designated by the attorneys general will send claim forms to eligible persons. Even if you are not contacted, if your loan is serviced by one of the five settling banks, you are encouraged to contact your servicer to see if you are eligible.
In any event, borrowers may contact their mortgage servicer to obtain more information about specific loan modification programs and whether the borrower may be impacted by this settlement. More information will be made available as the settlement programs are implemented.
For more information on the National Mortgage Settlement, please visit:
www.NationalMortgageSettlement.com
To contact your mortage service provider with questions:
Bank of America: 1-877-488-7814
Citi: 1-866-272-4749
Chase: 1-866-372-6901
Ally (GMAC): 1-800-766-4622
Wells Fargo : 1-800-288-3212