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State and federal authorities held a press conference to announce a $25 billion settlement with the five largest mortgage servicers, and provided key details on how the money was being distributed and the amounts each institution is expected to pay.
February 9 -
After months of wrangling, California and New York's attorneys general have joined a settlement with the top five mortgage servicers. Final details of the plan are scheduled to be released this morning.
February 9
The $25 billion 'robo-signing' settlement with five major servicing banks
With less than $20 billion of the settlement designated to principal reduction and refinancing underwater borrowers, Donovan told reporters on Thursday that the banks will not receive a dollar-for-dollar credit for reducing the principal amount of each loan.
He noted that a bank will not receive a full credit toward the settlement figure on loans that are seriously delinquent and not fully collectable.
"We are not going to give them a dollar of credit for writing off a dollar" of those loans, he said at the robo-signing settlement press conference.
For now, the deal involves the nation's five largest residential servicers: Bank of America Corp., Wells Fargo & Co., JPMorgan Chase & Co., Citigroup Inc. and Ally Financial.
In terms of actual principal reductions, "It's in the neighborhood of $35 billion," Donovan said Thursday morning.
California attorney general Kamala Harris estimates that her state's portion of the settlement will lead to $12 billion in principal reductions or short sales. In total, it could help 250,000 Californians who are underwater and delinquent on their mortgages.
"California families will finally see substantial relief after experiencing so much of the pain from the mortgage crisis," Harris said.
Harris' office released details of the deal as it pertains to California homeowners just before the press conference announcing the deal.
Donovan noted that the principal reductions are largely targeted at loans held in the banks' portfolios, excluding Fannie Mae, Freddie Mac or FHA loans. He said that B of A has agreed to employ principal reduction in seasoned Countrywide Financial Corp. loans, including notes that are part of private label securities.
Bank of America — which is in the process of slashing its presence in mortgage banking — has agreed to solicit all Countrywide borrowers and engage in "deeper" principal reductions on such loans.
Under a separate settlement, B of A has already agreed to compensate private-label securities investors.
"The vast majority of private-label securities loans that are reduced in principal will be the old Countrywide loans and investors are being compensated," Donovan said.
