Attorney General Doug Gansler Secures Nearly $1 Billion For Victims of Mortgage Crisis
Five biggest mortgage servicers to adopt new servicing standards
Maryland Commissioner of Financial Regulation Mark Kaufman helps drive new mortgage servicing standards
Baltimore, MD (February 9, 2012) - Attorney General Douglas F. Gansler today announced a settlement with the nation's five largest mortgage servicers, bringing a projected $960 million in monetary benefits and relief to distressed Maryland homeowners. This is the largest joint state-federal settlement in our nation's history and it will help thousands of Marylanders stay in their homes through enhanced loan modifications and other services. It also requires comprehensive reform of mortgage loan servicing standards.
The nation's five largest mortgage servicers, Wells Fargo, Bank of America, Citi, JP Morgan Chase, and Ally Bank/GMAC, agreed to the multi-state financial settlement in response to a nationwide investigation into foreclosure abuses, fraud, and unacceptable mortgage servicing practices such as “robo-signing. ”
“This agreement will provide direct, imminent, and significant relief at last to thousands of Maryland homeowners,” said Attorney General Gansler. “It is a down payment and a first step toward lasting reform of the mortgage industry. ”
This landmark agreement - the largest of its kind in Maryland history - is between the Maryland Office of the Attorney General, the Department of Labor, Licensing, and Regulation's Office of the Commissioner of Financial Regulation, the Federal government, and the five leading bank mortgage servicers, and provides $25 billion dollars in relief to homeowners nationally.
The money will be used for:
- Individual payments to borrowers who were victims of these banks' unfair servicing practices and were foreclosed upon between January 1, 2008 and December 31, 2011;
- Loss mitigation programs, such as loan modifications (including principal reductions), forbearance plans, and short sales for homeowners with loans serviced by the five big banks who are behind on or very likely to soon fall behind on their mortgage payments due to financial circumstances;
- Refinancing for homeowners with loans owned and serviced by the five big banks who are current in their payments but who owe more than their homes are worth; and
- Housing counseling and other state-level foreclosure prevention and housing programs.
“The relief provided by this agreement redresses mortgage servicing misconduct,” said Gansler. “It does not release the banks from criminal liability. It does not prevent individuals from bringing their own claims. And it will not stop our office from pursuing the banks over misconduct in the securitization of mortgages, fair lending violations, or other fraud. People should expect to see further action. ”
Attorney General Gansler thanked Maryland Commissioner of Financial Regulation Mark Kaufman and his office for serving on the State Banking Examiners Executive Committee as part of the effort and leading the state banking examiners in their investigation of GMAC, the only state-licensed servicer. “Their leadership and advice in the investigation was invaluable to the Attorneys General, indeed to everybody, involved in this case,” said Gansler.
“I am very proud of this multi-state settlement, which will bring meaningful relief to thousands of borrowers in our state,” said Commissioner Kaufman. “Importantly, the settlement also includes extensive new requirements to address the shoddy mortgage servicing practices that have too often characterized this crisis. ”
The final agreement, through a consent judgment, will be filed in U.S. District Court in Washington, D.C. , and will have the authority of a federal court order. Compliance with the standards can ultimately be enforced through the court process. In addition, a special independent monitor will oversee the banks, issue periodic reports, and identify any potential violations. Federal agencies, state attorneys general, and bank regulators can enforce compliance if there are violations the banks do not fix promptly. If the five banks fail to remedy violations, they will be subject to civil penalties.
The settlement also builds in incentives designed to ensure prompt compliance, including a large monetary penalty if the banks do not meet targets for distributing the benefits required by the settlement on time.
In anticipation of numerous calls from distressed homeowners upon hearing of the settlement, Attorney General Gansler's office has set up a call center with 10 dedicated lines to answer inquiries regarding the settlement. The phones will be answered by trained staff who will provide information about the settlement, collect homeowner information for future follow up, and help homeowners determine if they may be eligible for relief under the settlement.
The volunteers will then transfer the homeowners to the Maryland HOPE hotline, where they will be connected with a housing counselor in their area who will assist the homeowners with their efforts to obtain relief under the settlement. It is expected that a portion of Maryland's settlement money will be used to train and certify more housing counselors to assist eligible Maryland homeowners with getting the relief offered in this settlement and with other housing issues.
“The single most effective way to help distressed homeowners retain their homes is to connect them with a housing counselor,” said Raymond Skinner, Maryland Secretary of Housing and Community Development (DHCD). “Early intervention and counseling can provide homeowners with invaluable assistance as they work with their lender or mortgage servicer. ”
Attorney General Gansler thanked the Maryland HOPE Hotline along with its network of nonprofit housing counselors and legal aid organizations for their willingness to help guide homeowners through the relief process set out in this agreement.
“It will take some time for distressed owners to get the relief mandated in the settlement. The help of counselors in the Maryland HOPE network will be invaluable,” said Gansler.
Under the settlement, participating mortgage servicers are required to contact borrowers directly regarding loan modification options in some cases. However, borrowers should not wait to hear from the banks. They should, with the assistance of a housing counselor, contact their mortgage servicer to obtain more information about specific loan modification programs and whether they qualify under terms of this settlement.
Marylanders interested in learning more details can contact their housing counselor or call:
- Maryland Office of the Attorney General: 410-576-6300 or 1-888-743-0023 toll free
Marylanders who make, or previously made, mortgage payments to one of the five mortgage servicers may call special toll-free hotlines established for the purpose of handling claims under this agreement. If homeowners choose to call the banks directly, Attorney General Gansler is urging all distressed homeowners to seek the assistance of a housing counselor by calling the Maryland HOPE hotline at 1-877-462-7555 or visiting their website at www.mdhope.org.
Attorney General Gansler also warned homeowners to beware of people promising to assist them with guaranteed results of a loan modification for a fee. It is likely a scam. For a list of trained and certified non-profit housing counselors working with Maryland's DHCD go to www.mdhope.org.
More information will be made available as the settlement programs are implemented.
For more information on the agreement visit Attorney General Gansler's website:
Additional information is available at: