Mortgage Servicers Agree to Largest Civil Settlement Ever
Five mortgage servicers accused of lending violations agreed to the largest joint federal-state civil settlement ever. The mortgage servicers settled charges made by the federal government and 49 state attorneys for mortgage loan servicing and foreclosure abuses.
The federal government and state attorneys general accused the lenders of using “robo-signed” affidavits in foreclosure proceedings as well as deceiving consumers when offering loan modifications. The joint federal-state group also accused the lenders of failing to offer non-foreclosure alternatives to federally-insured borrowers and filing “improper documentation” in federal bankruptcy court.
As part of the settlement, Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial (formerly GMAC) agreed to commit $25 billion to remedy federal and state violations. The agreement requires that the servicers provide $20 billion in financial relief to borrowers. The servicers will also provide $5 billion to federal and state governments to repay, in part, public funds lost because of servicer misconduct.
The companies also agreed to submit themselves to increased oversight of foreclosure processing as well as new pre-filing requirements for documents submitted to bankruptcy court. According to the Department of Housing and Urban Development
, the new requirements are “in keeping” with President Obama’s recently announced Homeowners Bill of Rights
The settlement must still be approved by a court, notes Professor David Skeel
of the University of Pennsylvania Law School in an op-ed
in the Wall Street Journal