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More than a day after the announcement of a mammoth national mortgage servicing settlement, the actual terms of the deal still aren't public. That's because a fully authorized, legally binding deal has not been inked yet.
February 10 -
For the moment, the job of ensuring that the nation's largest banks comply with the terms of last week's mammoth mortgage settlement falls on just one man: Joseph A. Smith, Jr., North Carolina's banking commissioner.
February 13 -
Multiple state and federal officials put the banks on notice that the $25 billion mortgage servicing settlement is just the first step in pursuing civil litigation and criminal prosecutions in connection with misdeeds before, during and after the financial crisis.
February 9
WASHINGTON — Federal officials and state attorneys general released new documents Tuesday about the $25 billion multi-state servicing settlement, but still have yet to release a final settlement term sheet.
An
We offer a quick breakdown of what the settlement entails, based on the latest documents released Tuesday:
Relief for Homeowners
- The five servicers must allocate $17 billion in assistance to borrowers who have the "intent and ability" to stay in their homes while making "reasonable payments" on their mortgage loans.
- At least 60% must be allocated for principal write-downs for borrowers who are in default, or at risk of default on their loan payments.
- Servicers must also provide $5.2 billion for other forms of assistance, including the facilitation of short sales, unemployed payment forbearance, and relocation assistance.
Refinancing for Underwater Homes
- Servicers must offer refinancing programs totaling at least $3 billion for underwater borrowers.
- To be eligible, the borrower must be current on their mortgage payments, have a loan to value ratio great than 100%, and must have a current interest rate of more than 5.25%.
- The refinanced rate must reduce monthly payments by at least $100.
New Servicing Standards
- The new standards require all information in foreclosure affidavits to be personally reviewed and based on "competent" evidence.
- Holders of the loans and their legal standing to foreclosure must be disclosed to borrowers, and servicers must provide borrowers with a pre-foreclosure notice.
- Borrowers must be fully evaluated for all available loss mitigation options before foreclosure, and so-called "dual tracking" will be restricted.
- Banks must implement procedures — including regular audits and enhanced billing dispute rights for borrowers — to ensure accuracy of accounts and fees.
- They must also adopt procedures to oversee foreclosure firms, trustees and other third parties.
- They must designate an employee as a continuing single point of contact to assist borrowers seeking loss mitigation.
- The standards also impose restrictions on fees and force-placed insurance; require banks to maintain adequately trained staff to handle loss mitigation; and require application and qualification information for proprietary loan modifications be made public.
Monitoring and Enforcement
- The settlement with each bank will be incorporated into a "consent judgment" that must be approved by a federal court, and civil penalties of up to $5 million may be assessed for violations of the court judgment.
- Compliance with the servicing standards and financial obligations will be overseen by an independent monitor — North Carolina Banking Commissioner Joseph Smith — who will provide periodic reports to the AGs.
- Banks must report on their compliance by tracking metrics and performance outcomes; including proper documentation of foreclosures; loss mitigation offers and proper evaluation of loan modification requests; accurate borrower account information; and accurate and proper fee assessments.
Payments to Victims and States
- Approximately $1.5 billion of the funds will be allocated to compensate borrowers who were foreclosed on after Jan. 1, 2008.
- Borrowers who were not properly offered loss mitigation or who were improperly foreclosed on will be eligible for a uniform payment of approximately $2,000, "depending on level of response."
- Individual borrowers will not have to release any claims and may be eligible for restitution through the foreclosure review process administered by the banking regulators.
- Another $2.5 billion will go to the states and may be distributed by the AGs for foreclosure relief and housing programs. A portion of the funds may also be designated as civil penalties for robosigning misconduct.
Release of Claims
- The settlement provides a broad release for claims relating to servicing, foreclosure preparation and mortgage origination services.
- It applies only to the banks named in the settlement, and not to third parties, such as MERS.
- It does not release claims related to securitization, violations of fair lending law, criminal law enforcement, claims of state agencies that have independent jurisdiction, claims of county recorders for fees, actions to quiet title to foreclosed properties, or claims by individual borrowers.
