Washington Signs Joint State-Federal Servicing Settlement, Bringing Financial Relief To Struggling Homeowners

02/09/2012
State attorneys general negotiate deal with five major mortgage servicers, including funds to assist homeowners with under water mortgages, those facing foreclosure and victims of unfair foreclosure practices

OLYMPIA – The Washington State Department of Financial Institutions (DFI) commends the Washington State Attorney General’s Office for its role in successfully negotiating significant financial compensation as part of a national settlement from five of the nation’s largest mortgage loan servicers for Washington homeowners struggling to keep their homes and those who lost their homes due to unfair foreclosure practices.

The $25 billion settlement is between 45 state regulatory agencies and the District of Columbia, 49 state attorneys general, a host of federal agencies, and the five largest mortgage servicing companies – Bank of America Corp., Wells Fargo & Co., JPMorgan Chase & Co., Citigroup Inc., and Ally Financial Inc.

"After many months of difficult negotiations, we are very pleased to see this settlement — it should help a lot of people. I’m particularly enthused, as a regulator, to see the very significant expectations for behavioral change by mortgage servicers, and we intend to enforce these expectations as they pertain to entities we regulate at the state level as we go forward," DFI Director Scott Jarvis said. "This is a very important chapter that’s been closed, but there are more chapters to come. There are others who need to be held accountable as well."

Comprehensive and detailed examinations conducted by state regulators unearthed failures that resulted in more than just poor customer service or simple problems with legal paperwork. Unfortunately, unnecessary foreclosures occurred due to failure to process homeowners’ requests for modified payment plans and where foreclosures should have been concluded, shoddy documentation led to protracted delays.

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 knowing whether the facts they contained were correct. Both of these practices violate state and federal law.

After more than a year of investigation and negotiations, states reached an agreement with the servicers on a national settlement.

The result of this combined effort is approximately $25 billion in sanctions and homeowner relief in nearly every state. State financial regulators — including Washington DFI — along with the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators, as well as bankruptcy attorneys and investor groups, consumer groups and legal aid attorneys also provided valuable examination resources, assistance, cooperation and information in the pursuit of this settlement.

The coordinated state examination of Ally Financial Inc, a state chartered entity, was conducted under the leadership of the Multi-State Mortgage Committee (MMC), a body created by state financial regulators in 2008 through the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators. The MMC was the single point of contact during the servicing examinations for the state regulators, and provided a seamless line of communication with the state attorneys general during the course of the examinations.

"DFI would also like to recognize Attorney General Rob McKenna and Assistant Attorneys General David Huey and James T. Sugarman," Director Jarvis added, "for their leadership, hard work and persistency in the pursuit of this agreement on behalf of Washington residents."

Under the agreement, the five servicers have agreed to a $25 billion penalty 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.
  • Servicers commit $3 billion to an underwater mortgage refinancing program.
  • Servicers pay $5 billion to the states and federal government.
  • Homeowners receive comprehensive new protections from new mortgage loan servicing and foreclosure standards.
  • An independent monitor will ensure mortgage servicer compliance.
  • States can pursue civil claims outside of the agreement including securitization claims as well as criminal cases.
  • Borrowers and investors can pursue individual, institutional or class action cases regardless of agreement.
  • Loans owned by Fannie Mae or Freddie Mac are not impacted by this settlement. To determine whether your loan is owned by either Fannie Mae or Freddie Mac, visit:
    www.fanniemae.com
    www.freddiemac.com

For details on the proposed agreement and lender or attorney general contact information visit www.NationalForeclosureSettlement.com.

Media Contact

Lyn Peters, Director of Communications
PH (360) 902-8731 or lyn.peters@dfi.wa.gov

DFI Main Phone Number
1.877.RING DFI (746-4334)

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