Alaska Joins $25 Billion Settlement on Mortgage Servicing and Foreclosure Abuses
February 11, 2012
The settlement will provide as much as $25 billion in relief to distressed borrowers and direct payments to states and the federal government. It’s the largest multistate settlement since the Tobacco Settlement in 1998.
The agreement settles state and federal investigations finding that the country’s five largest loan servicers routinely signed foreclosure related documents outside the presence of a notary public and without really knowing whether the facts they contained were correct. Both of these practices violate the law. The settlement provides benefits to borrowers whose loans are owned by the settling banks as well as to many of the borrowers whose loans they service.
The agreement provides direct relief for Alaskan homeowners and brings reforms to loan servicing practices. “Alaska is fortunate to have missed the real estate crash affecting many states in the Lower 48,” said Geraghty. “At the same time, some Alaskan families, through no fault of their own, are struggling to stay in their homes. This agreement not only provides financial relief to Alaskan borrowers, but puts in place important new protections for homeowners in the form of mortgage servicing standards.”
With the backing of a federal court order and the oversight of an independent monitor, the settlement stops future servicing and foreclosure misconduct. The five servicers will be required to consider homeowners for loan modification programs before foreclosing. Borrowers will have a single point of contact for questions about their loans, and servicers will be required to have adequate staff to handle calls.
The state’s estimated share of the settlement is more than $10 million.
Nationwide, the five servicers have committed a minimum of $17 billion to national homeowner relief effort options, including principal reduction. They have also committed $3 billion to a mortgage refinancing program for borrowers who are current, but owe more than their home is currently worth. Servicers will pay $5 billion to the states and federal government.
This enforcement action targets one segment of the nation’s vast and complex mortgage market, though the new servicing standards will apply to all mortgage loans serviced by the settling banks.
The settlement does not grant the five servicers immunity from criminal offenses and will not affect criminal prosecutions. It also does not prevent homeowners or investors from pursuing individual, institutional, or class action cases against the five servicers.
Because of the complexity of the mortgage market and this agreement, borrowers whose loans are serviced by the five servicers will not immediately know if they are eligible for relief. For loan modifications and refinance options, borrowers will be contacted by their servicers. For payments to foreclosure victims, a settlement administrator will send claim forms to eligible individuals. Borrowers should also contact their servicers directly to see if they qualify for relief under the settlement.
Edited by Mary Kauffman, SitNews
On the Web:
Sources of News: