‘This agreement – the largest joint federal-state settlement ever obtained – is the result of unprecedented coordination among enforcement agencies throughout the government,’ says U.S. Attorney General Eric Holder, who announced the agreement this morning in Washington, D.C., alongside U.S. Department of Housing and Urban Development Secretary Shaun Donovan, Iowa Attorney General Tom Miller and Colorado Attorney General John W. Suthers. ‘It holds mortgage servicers accountable for abusive practices and requires them to commit more than $20 billion towards financial relief for consumers. As a result, struggling homeowners throughout the country will benefit from reduced principals and refinancing of their loans. The agreement also requires substantial changes in how servicers do business, which will help to ensure the abuses of the past are not repeated.’
According to combined media reports, the two state attorneys general who have been highly critical of the depth and scope of the proposed settlement – California's Kamala Harris and New York's Eric Schneiderman – have reversed their previous reluctance and signed the agreement. Of the 50 state attorneys general participating in the settlement, only E. Scott Pruitt of Oklahoma has reportedly not signed on yet.
The settlement involves Ally Financial, Bank of America, Citigroup, JPMorgan Chase and Wells Fargo. As part of the agreement, $5 billion will be paid to the federal and state government agencies. The settlement may be expanded to a $30 billion deal if nine additional major servicers sign on to the settlement.
The deal calls for $2,000 payments to be made to homeowners who lost their residences due to improper foreclosure procedures. The agreement only covers loans that are owned by the five banks and does not cover loans that are owned by Fannie Mae, Freddie Mac or the Federal Housing Administration.
The full details of the agreement are now online.