Florida Enters $25 Billion Joint State-Federal Mortgage Servicing Settlement
TALLAHASSEE, Fla.-Attorney General Pam Bondi today formally entered a landmark $25 billion joint federal-state agreement with the nation’s five largest mortgage servicers over foreclosure abuses and unacceptable nationwide mortgage servicing practices. The proposed agreement provides an estimated $8.4 billion in relief to Florida homeowners and addresses future mortgage loan servicing practices. The settlement generally releases civil claims related to robo-signing, other foreclosure-related abuses, and loan origination misconduct, but it provides no release of criminal claims or of claims related to mortgage securitization.
“This settlement will provide substantial relief to struggling Florida homeowners, and ensures that our state gets its fair share of the relief being provided nationally,” stated Attorney General Pam Bondi. “This agreement holds banks accountable and puts in place new protections for homeowners in the form of strict mortgage servicing standards.”
Florida’s share of the total monetary benefits under the settlement is approximately $8.4 billion.
· Florida borrowers will receive an estimated $7.6 billion in benefits from loan modifications, including principal reduction, and other direct relief.
· Approximately $170 million will be available for cash payments to Florida borrowers who lost their home to foreclosure from January 1, 2008 through December 31, 2011 and suffered servicing abuse.
· The value of refinanced loans to Florida’s underwater borrowers would be an estimated $ 309 million.
· The state will receive a direct payment of $ 350 million.
In addition to the terms of the national settlement agreement, Attorney General Bondi separately negotiated an agreement with the nation’s three largest mortgage servicers to ensure that a guaranteed portion of the overall settlement funds goes to Florida borrowers.
The unprecedented joint state-federal settlement is the result of a civil law enforcement investigation and initiative that includes state attorneys general and state banking regulators across the country, and nearly a dozen federal agencies. The settlement holds banks accountable for past mortgage servicing and foreclosure fraud and abuses and provides relief to homeowners. With the backing of a federal court order and the oversight of an independent monitor, the settlement reforms the mortgage servicing industry and protects against future fraud and abuse.
Under the agreement, the five servicers have agreed to $25 billion in monetary relief under a joint state-national settlement structure.
· Servicers commit a minimum of $17 billion directly to borrowers through a series of national homeowner relief effort options, including principal reduction. Given how the settlement is structured, servicers will actually provide up to an estimated $32 billion in direct homeowner relief.
· Servicers commit $3 billion to a mortgage refinancing program for borrowers who are current, but owe more than their home is currently worth.
· Servicers pay $5 billion to the states and federal government $4.25 billion to the states and $750 million to the federal government. The state payments include funding for payments to borrowers for mortgage servicing abuse.
· Homeowners receive comprehensive new protections from new mortgage loan servicing and foreclosure standards.
· An independent monitor will ensure mortgage servicer compliance.
· Government can pursue civil claims outside of the agreement, any criminal case; borrowers and investors can pursue individual, institutional or class action cases.
The settlement does not grant any immunity from criminal offenses and will not affect criminal prosecutions. The agreement does not prevent homeowners or investors from pursuing individual, institutional or class action civil cases against the five servicers. The pact also enables state attorneys general and federal agencies to investigate and pursue other aspects of the mortgage crisis, including securities cases.
The final agreement, through a consent judgment, will be filed in U.S. District Court in Washington, D.C., and will have the authority of a court order.
Because of the complexity of the mortgage market and this agreement, which will span a three year period, in some cases participating mortgage servicers will contact borrowers directly regarding loan modification options. However, borrowers should contact their mortgage servicer to obtain more information about specific loan modification programs and whether they qualify under terms of this settlement or other available programs.
More information will be made available as the settlement programs are implemented.