Mortgage settlement finalized by courts | State gets $648 million in relief
By GREG ALLMAIN
Federal Way Mirror reporter
April 9, 2012 · 11:26 AM
The $25 billion national mortgage settlement was finalized by court order on April 5.
According to Washington State Attorney General Rob McKenna's office, a federal judge ordered the nation's five largest mortgage servicers "to comply with comprehensive new mortgage loan servicing standards, provide substantial direct consumer relief and monetary payments, and submit to an independent monitor."
"These powerful federal court orders are the final step in formalizing the largest financial consumer protection settlement in history, opening the door to loan modifications, principal reductions and other benefits for many borrowers here in Washington and across the country," McKenna said.
"In addition to those benefits, the orders also spell out the tough new servicing standards we negotiated to protect homeowners and ensure mortgage lenders are playing by the right set of rules from now on."
U.S. District Court Judge Rosemary Collyer finalized the new rules for the Big Five: Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial. Her ruling follows the joint complaint filed by the U.S. Departments of Justice and Housing and Urban Development last month. 49 state attorneys general, including McKenna, were also part of those who filed against the mortgage servicers.
The complaint alleged that the financial institutions' misconduct resulted in "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."
"In other words, their shoddy loan servicing, illegal robo-signing and faulty foreclosure processing victimized taxpayers and struggling homeowners all across the country, including tens of thousands here in Washington state," McKenna said.
In Washington, it's estimated the state will receive $648 million in relief funds. Of that $648 million, $483 million is anticipated to come from loan term changes with the Big Five. Those changes include significant principal reduction, which helps those who owe more on their mortgage than their house is worth and are at imminent risk of default. It's also anticipated Washington borrowers who lost their homes to foreclosure between Jan. 1, 2008, and Dec. 31, 2011, could qualify for an estimated $24 million in payments. Those who may qualify for this should receive a written notice in the coming months.
For homeowners who are underwater, meaning they're current on payments but are paying more on their mortgage than the house is worth, it's anticipated that the value of refinanced loans under the new rules will be in the range of $84 million.
McKenna's office itself will receive a direct payment of $54.2 million, with $10 million of that being aimed at civil penalties and litigations costs incurred by the poor practices of the mortgage lenders. The remaining $45 million for will go toward foreclosure relief and housing programs here in the state.
For more information, visit www.atg.wa.gov.
Contact Federal Way Mirror reporter Greg Allmain at firstname.lastname@example.org or 253-925-5565 ext. 5054.