National $25B Mortgage Settlement Approved by Federal Judge

The $25 billion settlement received approval from a federal judge Wednesday, but the announcement was not made public until Thursday, according to a ""Reuters' article"":http://www.reuters.com/article/2012/04/05/us-mortgage-settlement-idUSBRE8341C820120405 published Thursday evening.

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U.S. District Judge Rosemary Collyer approved the national, historical settlement, which was brought on by federal officials and 49 state attorneys general against the top five largest servicers - Bank of America, Citigroup, JPMorgan Chase, Wells Fargo, and Ally Financial.

The investigations revolving around the settlement involved issues with foreclosure abuses and servicing problems such as robo-signing, lost paperwork, and problematic modifications. The settlement was ""filed"":http://www.justice.gov/opa/pr/2012/March/12-asg-306.html in federal court in March, and the agreement was ""reached"":http://dsnews.comarticles/robo-signing-settlement-finalized-2012-02-09 in February after more than a year of negotiations.

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Oklahoma was the only state to opt out of the agreement, with the state's Attorney General Scott Pruitt deciding to seek out a separate settlement leading to $18.6 million.

Pruitt said in a statement that the settlement he sought would provide for Oklahomans who were victims of misconduct ""while not exceeding the appropriate role and authority of state attorneys general.""

Calling the approval ""a victory for American homeowners,"" HUD Secretary Shaun Donovan in a statement said, ""we know that now the real work begins to hold these servicers accountable and ensure that the nearly 2 million homeowners who are expected to receive help and relief actually get it.""

Of the $25 billion, $20 billion in relief will be designated to help homeowners through principal reduction, refinancing for underwater homes, principal forbearance for unemployed borrowers, short sales assistance, and additional benefits for service members. An additional $5 billion will go to government officials.

The settlement will also require new servicing standards for foreclosure prevention. Aside from banning practices such as robo-signing, servicers will no longer be able to foreclose on a borrower being considered for a loan modification and are required to assign a single point of contact for borrowers.