Letter From the Attorney Generals Office - Housing Specialist

Dear Rebecca: 

Thank you for contacting the Attorney General’s Office about the National Mortgage Servicing Settlement. Announced on February 9, 2012, the Settlement involves the five largest mortgage servicers in the country and includes 49 state attorneys general, including Idaho, the U.S. Department of Justice, and the U.S. Department of Housing and Urban Department.

The loan servicers—Ally/GMAC, Bank of America, Citi, JPMorgan Chase, and Wells Fargo—service approximately 60% of the national home mortgage market and hold for investment (HFI) approximately 20% of the nation’s mortgages. The Settlement provides $25 billion in financial relief to homeowners with HFI loans through restitution, mortgage modifications, reduced interest rates, principal reductions, deficiency judgment waivers, and other benefits.

The Settlement resolves state and federal allegations that the five servicers signed foreclosure-related documents outside the presence of a notary public without knowing whether the facts contained in the documents were accurate. The Settlement does not release the servicers from criminal liability, affect an individual’s private claims, or prevent federal or state regulators from investigating cases related to mortgage-backed securities or the Mortgage Electronic Registration System (MERS).

The following is a brief summary of the Settlement’s key provisions:

·         It aids homeowners needing loan modifications, including first and second lien principal reduction. The servicers are required to work off $17 billion in principal reductions and other forms of loan modification relief nationwide and more than $74 million in Idaho.

State attorneys general anticipate the settlement’s requirement for principal reduction will show other lenders 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.

·         It aids borrowers who are current on their loans, but who also are underwater.  Borrowers will be able to refinance at today’s historically low interest rates.

·         Servicers will provide $3 billion in refinancing relief nationwide with $15 million going to Idaho’s homeowners.

·         It provides 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. $1.5 billion will be distributed nationwide to 750,000 borrowers. In Idaho, approximately 5,000 eligible borrowers will receive almost $10 million in restitution.

·         It provides nationwide reforms to servicing standards. These servicing standards require single point of contact, adequate staffing levels and training, better communication with borrowers, appropriate standards for executing documents in foreclosure cases and prohibits improper fees and dual-track foreclosures.

·         Attorneys general will have oversight of national banks for the first time.  The servicers must provide regular compliance reports to an independent monitor.

·         The servicers are subject to penalties for non-compliance with the settlement, including missed deadlines.

Summary of the Settlement Implementation Process

During the next few months, the states, federal regulators, and servicers will select an Administrator to oversee the Settlement’s implementation. The Settlement Administrator, in association with the mortgage servicers, will work to identify Idahoans who are eligible for the various programs, including the restitution payments, principal reductions, and loan modifications.

Within the next nine months, many eligible borrowers will receive letters from the Settlement Administrator explaining what they need to do to obtain their benefit. Other eligible borrowers will hear directly from their loan servicers.

It is important for borrowers to be patient during the settlement process. Because the Settlement will be implemented over the period of 3 years, you will not know immediately if you are eligible for relief. A Settlement of this magnitude takes a lot of time.

 

For additional information about the Settlement, please check the Attorney General’s website at www.ag.idaho.gov on a regular basis. You may also find the link to the National Mortgage Servicing Settlement frequently asked questions helpful at http://www.ag.idaho.gov/consumerProtection/mortgageSettlement/FAQs.html.  We will provide updates as additional information becomes available. The Attorney General’s website also provides a substantial amount of information about Idaho’s foreclosure process, how to avoid foreclosure, where to find a housing counselor, and how to avoid mortgage fraud. You can also visit the National Settlement website at www.nationalforeclosuresettlement.com for current information about the Settlement.

If you have a complaint against a mortgage servicer—not just one included in the settlement—you may submit a complaint form to us, and we will review it for submission to our informal dispute resolution program. Complaint forms are available to download from our website or by calling our office at (208) 334-2424.

I hope this information is helpful to you.

Thank you,

KATHY REAM

Housing Specialist