The $25 billion mortgage servicing settlement agreement was filed in federal court Monday, announced the ""Justice Department"":http://www.justice.gov/, ""HUD"":http://portal.hud.gov/hudportal/HUD, and 49 state attorneys general.[IMAGE]
State and federal officials and five of the largest servicers Ã¢â‚¬" ""Bank of America"":https://www.bankofamerica.com/, ""J.P. Morgan Chase"":http://www.jpmorganchase.com/corporate/Home/home.htm, ""Wells Fargo"":https://www.wellsfargo.com/, ""Citigroup"":http://www.citigroup.com/citi/homepage/, and ""Ally Financial"":http://www.ally.com/ Ã¢â‚¬" settled on February 9, outlining an agreement to address faulty practices in the mortgage industry and to deal with issues regarding wrongful foreclosures.
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.[COLUMN_BREAK]
Now, there are court documents to provide the details of the servicers' financial obligations under the agreement, which include $20 billion in consumer relief, and new servicing standards that will change foreclosure practices for mortgage companies.
The $20 billion in relief will help homeowners through principal reduction and 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.
With new servicing standards are new policies for foreclosure prevention. For example, servicers will no longer able to foreclose on a borrower being considered for a loan modification, and servicers are required to have a single point of contact for borrowers.
The settlement also establishes a third-party monitor to oversee implementation of the servicing standards, and if violations are found, the servicer can be penalized up to $1 million per violation or up to $5 million for certain repeat violations.
After federal authorities led investigations on servicing practices, issues were found such as lost paperwork, robo-signing, and unfair fees. While the settlement has been hailed as a significant landmark agreement that will help millions of homeowners, critics question the real impact considering the settlement does not include Fannie Mae and Freddie Mac, which are said to control more than half of all mortgages in the United States.