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Madigan joined U.S. Attorney General Eric
Holder, U.S. Housing and Urban Development
Secretary Shaun Donovan and her counterparts
in Washington, D.C., in announcing the
settlement with Bank of America, JPMorgan
Chase, Wells Fargo, Citibank and Ally Bank,
formerly GMAC.
Today's settlement is the second-largest
settlement ever obtained through joint
action of state attorneys general. It will
provide more than $1 billion in relief for
Illinois to assist those who have lost their
homes, are underwater with payments or at
imminent risk of defaulting on their
mortgages. The settlement will completely
overhaul mortgage servicing standards to
prevent future abuses by lenders that many
consumers have faced while trying to save
their homes and during the foreclosure
process.
"After many months of investigation and
negotiation, I've concluded that this
settlement accomplishes two major goals: It
provides timely help for struggling
homeowners, and it establishes new rules for
mortgage servicing that will protect
homeowners in the future," Madigan said.
"While the settlement is a big step forward
in our efforts, it is not the end. In
Illinois, we will continue to take strong
legal action against lenders, banks,
servicers and others who contributed to the
housing and economic collapse."
Critical to
today's settlement are reforms to the
national mortgage servicing standards to
better assist and protect all borrowers,
including those who are in trouble on their
mortgages. In the past, regardless of how
well borrowers complied with bank
requirements to try to obtain a loan
modification or other assistance, borrowers
ended up facing foreclosure. These tough,
new standards will ensure borrowers are now
given a fair chance to save their homes:
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Distressed home borrowers will be
considered for a loan modification
rather than being automatically referred
to foreclosure.
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No loan will be referred to foreclosure
while a loan modification is being
considered.
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Borrowers will be allowed to appeal a
denial of a loan modification.
-
Mortgage servicers must provide a single
point of contact for borrowers as well
as easier methods for checking on the
progress of their loan modification
applications.
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Loan
servicers will be held to strict
timelines in dealing with distressed
borrowers
Protections will also be put in place to
ensure fairness and accuracy for all
borrowers making mortgage payments,
including increased disclosures on their
monthly mortgage billing statements,
maintenance of procedures to ensure the
accuracy in the posting of mortgage
payments, the posting of a schedule of all
fees on their website, and the requirement
that all fees must be reasonable, bona fide
and accurate.
The standards will be backed by tough
enforcement measures to ensure the banks
comply. The settlement will be filed in
federal court, and a monitor will be
appointed to oversee bank compliance. Banks
that violate the settlement terms will be
assessed significant monetary penalties.
Homeowners
whose loans were serviced by these banks may
also qualify for direct relief in three
categories:
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Borrowers who have lost their homes.
-
Homeowners who are still in their homes
but are at imminent risk of defaulting
on their mortgages or are behind on
their mortgage payments.
-
Borrowers who
are current on payments but underwater.
Participating mortgage servicers may
contact borrowers directly regarding loan
modification options. Borrowers should
contact their mortgage servicer to obtain
more information about specific loan
modification programs and whether they
qualify under terms of this settlement.
Attorney General Madigan also urged
consumers seeking more information to
contact her Homeowner's Helpline,
866-544-7151, or visit her website,
www.illinoisattorneygeneral.gov/
consumers/bankforeclosuresettlement.html.
Borrowers can also visit
www.NationalForeclosureSettlement.com.
The largest portion of the national
settlement, $17 billion, will help borrowers
who remain in their homes but are imminent
risk of default. Much of this money will be
used for reductions of principal on first
and second liens. Another $3 billion of the
settlement will assist borrowers to
refinance mortgages that are underwater,
meaning the outstanding loan balance is more
than the current appraised value of the
home. These borrowers are typically unable
to refinance their loans. And $1.5 billion
will be provided for restitution to
borrowers who have already lost their homes.
Additionally, $2.6 billion will go to states
for use in foreclosure prevention programs.
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In addition to direct relief to borrowers
in Illinois, the attorney general's office
will recover money from the banks to
remediate the effects of historic levels of
foreclosures on homeowners and communities,
including funding for legal aid services,
housing counseling, outreach to borrowers,
housing policy development and community
revitalization.
The settlement also provides for special
relief for members of the military by
requiring servicers to set up a specially
trained single point of contact to address
their mortgage issues. Members of the
military may also be eligible for a waiver
of a mortgage deficiency when they need to
sell their home in a short sale when ordered
to move.
The settlement does not grant any
immunity from criminal offenses, nor does it
prevent homeowners or investors from
pursuing individual, institutional or class
action civil cases against the five banks.
Attorneys general and federal agencies will
continue to investigate and pursue other
aspects of the mortgage crisis, including
securities cases.
In Illinois, the attorney general already
has lawsuits against Wells Fargo, Standard &
Poor's and Nationwide Title Cleaning Inc.,
as part of aggressive efforts to hold
financial institutions accountable for their
part in the housing and economic collapse.
Even before the housing market's
collapse, Madigan aggressively targeted the
country's biggest banks and lenders to hold
them accountable for their unlawful
financial misconduct that led to the
subsequent financial crisis, and to provide
relief and assistance to Illinois families
struggling to save their homes.
The Illinois attorney general recently
sued the national credit rating agency
Standard & Poor's, alleging the company
compromised its independence as a rating
agency by doling out high ratings to
unworthy, risky investments as a corporate
strategy to increase its revenue and market
share. Madigan also sued Nationwide Title
Clearing Inc. for filing faulty documents
with Illinois county recorders.
In December 2011, Madigan and the U.S.
Department of Justice reached a $335 million
settlement with Countrywide, a subsidiary of
Bank of America, for discriminating against
minority borrowers by putting them into
higher-cost loans than similarly
credit-situated white borrowers during the
height of the subprime mortgage lending
spree. The settlement will provide
restitution to harmed Illinois borrowers and
is the largest settlement of a fair-lending
lawsuit ever obtained by a state attorney
general.
The attorney general continues to fight a
fair-lending case in court against Wells
Fargo, alleging widespread discrimination
against African-American and Latino
borrowers during the subprime lending spree.
Madigan led an earlier lawsuit against
Countrywide, which resulted in a nationwide
$8.7 billion settlement in 2008 over the
company's predatory lending practices. The
attorney general also reached a $39.5
million settlement with Wells Fargo over the
bank's deceptive marketing of extremely
risky loans called Pay Option ARMs. In 2006,
Madigan obtained more than $10 million in
restitution for Illinois homeowners as part
of a $325 million multi-state settlement
with Ameriquest over the former mortgage
giant's deceptive sales of predatory
subprime mortgages.
The investigation that led to today's
settlement was handled in the Illinois
attorney general's office by Deborah Hagan,
chief of the Consumer Protection Division,
and Assistant Attorneys General Vaishali Rao,
Susan Ellis, Tom James, Steve Wrone, Paige
Boggs, Vivian Velasco and Andrew Dougherty.
[Text from
file received from the office of
Illinois Attorney General Lisa Madigan]
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