National Mortgage Settlement
In February 2012, Arkansas joined 49 other states and federal agencies to settle allegations of illegal actions in servicing loans by the nation’s largest mortgage servicers: Ally/GMAC, Bank of America, Citi, JPMorgan Chase and Wells Fargo. The settlement provides more than $25 billion in relief nationwide, mainly to distressed borrowers in the form of loan principal reductions and refinancing. Here is a brief description of the settlement’s primary provisions and information homeowners can use to determine how the settlement may apply to them.
- Principal Reductions: The settlement provides aid to homeowners who are currently in default and in need of loan modifications, including first and second lien principal reduction. The servicers are required to provide up to $17 billion worth of principal reductions and other forms of loan modification relief nationwide. Arkansas homeowners will receive $11.7 million worth of loan modifications from this settlement term.
- Refinance Opportunities: The settlement provides aid to borrowers who are currently making their monthly payments but are underwater. Borrowers whose loans are greater than the market value of their homes may be offered an opportunity to refinance at lower interest rates. The settlement requires servicers to provide up to $3 billion in refinancing relief nationwide. Arkansas homeowners will receive nearly $5.7 million through lower interest rates.
- Payments to Borrowers Who Lost Their Homes to Foreclosure: $1.5 billion will be distributed nationwide to some 750,000 borrowers. Approximately $8.5 million of this amount will go directly to Arkansas consumers whose homes were foreclosed upon between Jan. 1, 2008 and Dec. 31, 2011.
- New Mortgage Servicing Standards: These new standards will benefit each homeowner whose mortgage is held or serviced by any of these five banks. The banks are required to implement the following standards:
- Offer loss mitigation alternatives to borrowers before pursuing foreclosure.
- Increase the transparency of the loss mitigation process.
- Impose timelines to respond to borrowers involved in the loss mitigation process.
- Restrict the unfair practice of “dual tracking,” where foreclosure is initiated despite the borrower’s engagement in a loss mitigation process.
- The Banks' Performance of Their Obligations Under the Settlement Will be Overseen by an Independent Monitor:
- The monitor will employ a staff of professionals to review the banks’ compliance.
- The monitor will issue periodic reports to the Attorney General's office, including notices of any potential violations.
- The banks will report on their compliance in the form of agreed-upon metrics and outcome measures. Included among the compliance metrics are testing for proper documentation of foreclosures, loss mitigation offers and proper evaluation of loan modification applications.
- There will also be testing to ensure that borrowers’ account information is accurate and that any fees are properly assessed and are not excessive.
An administrator oversees the logistics of the settlement and monitors the mortgage servicer’s compliance with the settlement. Eligible homeowners are identified by the mortgage servicers and the settlement administrator. Once the identification process is complete, the mortgage servicers send written notification to homeowners.
Consumers may contact banks directly with any questions or information about loans:
- Bank of America: (877) 488-7814
- Citi: (866) 272-4749
- Chase: (866) 372-6901
- GMAC/Ally: (800) 766-4622
- Wells Fargo: (800) 288-3212
Contact the Attorney General's office for additional information or assistance at Consumer@ArkansasAG.gov or (800) 482-8982.