Utah joins $25 billion settlement in mortgage lender foreclosure action

wells fargo foreclosure
Photo Courtesy of AVVO

SALT LAKE CITY – Utah Attorney General Mark Shurtleff and Utah Governor Gary R. Herbert announced a landmark $25 billion joint federal-state agreement Feb. 9 with the nation’s five largest mortgage servicers. The ageement arose over foreclosure abuses and fraud and unacceptable nationwide mortgage servicing practices.

The proposed agreement provides an estimated $171,115, 273 in total benefits to the state of Utah. The total includes an estimated $45 million in direct relief to Utah homeowners and $102 million indirect relief and addresses future mortgage loan servicing practices. The state will receive direct payment of $22,987,615.

“This is the second largest settlement ever by the states and addresses serious misconduct against homeowners in Utah and other states,” said Shurtleff. “This agreement provides relief to homeowners and also stops the outrageous conduct that led to the mortgage crisis.”

“I commend the diligence and hard work of Utah’s Attorney General and his staff to right a wrong,” said the governor. “We hope those affected by the foreclosure crisis will take advantage of the programs and resources available through this settlement. I hope this sends a message that this kind of fraudulent conduct is not tolerated.”

U.S. Attorney General Eric Holder, U.S. Housing and Urban Development Secretary Shaun Donovan and a bipartisan group of state attorneys general announced the national settlement last Thursday in Washington, D.C.

Utah borrowers who lost their home to foreclosure during the period January 1, 2008, through December 31, 2011, and suffered servicing abuse would qualify. Approximately 23 percent of Utah homes are now underwater.

The unprecedented joint state-federal settlement is the result of a massive civil law enforcement investigation and initiative that includes state attorneys general and state banking regulators across the country, and nearly a dozen federal agencies.

The settlement holds banks accountable for past mortgage servicing and foreclosure fraud and abuses and provides relief to homeowners. With the backing of a federal court order and the oversight of an independent monitor, the settlement stops future fraud and abuse.

Under the agreement, the five servicers have agreed to a $25 billion penalty under a joint state-federal settlement structure. Here are highlights of the settlement:

  •  Servicers commit a minimum of $17 billion directly to borrowers through a series of national homeowner relief effort options, including principal reduction. Given how the settlement is structured, servicers will actually provide up to an estimated $32 billion in direct homeowner relief.
  •  Servicers commit $3 billion to a mortgage refinancing program for borrowers who are current, but owe more than their home is currently worth.
  •  Servicers pay $5 billion to the states and federal government ($4.25 billion to the states and $750 million to the federal government). The state payments include funding for payments to borrowers for mortgage servicing abuse.
  •  Homeowners receive comprehensive new protections from new mortgage loan servicing and foreclosure standards.
  •  An independent monitor will ensure mortgage servicer compliance.
  •  Government can pursue civil claims outside of the agreement, any criminal case; borrowers and investors can pursue individual, institutional or class action cases regardless of agreement.

The settlement does not grant any immunity from criminal offenses and will not affect criminal prosecutions. The agreement does not prevent homeowners or investors from pursuing individual, institutional or class action civil cases against the five servicers. The pact also enables state attorneys general and federal agencies to investigate and pursue other aspects of the mortgage crisis, including securities cases.

“This agreement addresses some breakdowns in the mortgage servicing industry but still allows us to go after other misdeeds,” said Chief Deputy Attorney General John Swallow. “Significantly, those who are still underwater in their homes could be eligible for principal reductions and loan modifications that would not otherwise be available had we gone to trial.”

The final agreement, through a consent judgment, will be filed later in U.S. District Court in Washington, D.C., and will have the authority of a court order.

Because of the complexity of the mortgage market and this agreement, which will span a three-year period, in some cases participating mortgage servicers will contact borrowers directly regarding loan modification options. However, borrowers should contact their mortgage servicer to obtain more information about specific loan modification programs and whether they qualify under terms of this settlement. Settlement administrators or state attorneys general may also contact borrowers regarding certain aspects of the settlement.

More information on the proposed settlement is available through the National Foreclosure Settlement website, the U.S. Department of Housing and Urban Development, and the U.S. Department of Justice.  Participating mortgage lenders may be telephoned at the following numbers:

Bank of America: 877-488-7814

Citi: 866-272-4749

Chase: 866-372-6901

GMAC: 800-766-4622

Wells Fargo: 800-288-3212

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1 Comment

  • lorivinson February 15, 2012 at 10:25 pm

    To find a great refinance rate, you should talk to at least one national mortgage lender, one local lender, a credit union and 123 Refinance. Also ask your friends which bankers and brokers they have used.

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