Va. signs $25 billion mortgage servicing settlement
6/11/2013, 11:34 a.m.
Virginia has signed on to a $25 billion joint federal-state settlement with the nation's five largest mortgage servicers over foreclosure abuses and fraud.
The proposed agreement provides an estimated $479,594,672.22 in direct relief or other benefits to Virginia home borrowers and addresses future mortgage loan servicing practices, according to the Virginia Attorney general's Office, which represented the state. This translates to roughly $1,500 each, for borrowers who lost their homes to foreclosure from Jan. 1, 2008, through Dec. 31, 2011.
U.S. Attorney General Eric Holder, U.S. Housing and Urban Development (HUD) Secretary Shaun Donovan and a bipartisan group of state attorneys general announced the national settlement on June 10 in Washington, D.C.
The mortgage servicers are Bank of America, J.P. Morgan Chase, Wells Fargo, Citigroup, and Ally Financial/GMAC.
"We joined the multistate investigation because there was credible evidence that banks had engaged in wrongdoing in the commonwealth," said Virginia Attorney General Ken Cuccinelli. "Based upon our investigation and the investigations conducted by the other states, we were able to confirm that the banks have been guilty of robo-signing and disregarding certain servicing issues. The banks must answer for this conduct, and this settlement makes them do just that.
"However, not every claim made about the banks has been demonstrated by the evidence. In crafting the settlement terms, we stressed to our fellow attorneys general and the U.S. Department of Justice our belief that the penalties and payments in the settlement be tied to actual acts of wrongdoing that were uncovered; and, in large measure, the states' part of the settlement does that.
"While there were some aspects of this settlement that we would not have drafted if we were the only state involved - aspects where the benefits being paid out are not as tightly tied to the wrongdoing as we would have liked - one of the costs of participating in a multi-state effort is the need to reach consensus. However, that cost was far outweighed by the benefits of addressing a national problem of fraud and abuse, as well as trying to clear the housing market to get the economy moving again. My priority is to enforce the rule of law in Virginia, and that is precisely what we did. I am pleased that the citizens of the commonwealth will benefit from the settlement that has been reached."
According to the terms of the settlement (see more), the value of refinanced loans to Virginia's underwater borrowers will be an estimated $84,309,742.00, with the state receiving a direct payment of $69,657,121.00. The Bureau of Financial Institutions at the State Corporation Commission, as Virginia's banking regulator, also joined the settlement and will receive an additional $1,000,000.
Mortgage 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 benefits to homeowners. These servicers have also committed $3 billion to a mortgage refinancing program for qualifying borrowers who are current but owe more than their home is currently worth.
An independent monitor will ensure mortgage servicer compliance and the government has reserved the right to pursue civil claims outside of the agreement and any criminal case. Additionally, borrowers and investors can pursue individual, institutional, or class action cases regardless of the agreement.
"This agreement addresses breakdowns in the mortgage servicing industry, and allows us to pursue other mortgage-related misconduct. However, I want to make clear that any Virginia citizen who believes that he or she was wrongfully foreclosed upon remains free to pursue a legal action against the appropriate bank. Nothing in this settlement deprives any individual of the right to make his or her personal claim," said Cuccinelli.
"While this settlement includes significant relief for homeowners, it also puts in place new protections for homeowners in the form of mortgage servicing standards. That is not something we would see if we simply won a money judgment in a trial."
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.