Settlement with Top Mortgage Service Providers a Win for Struggling Homeowners
February 09 2012
Washington, D.C.—In a major victory for struggling homeowners who fell victim to predatory lending and wrongful foreclosures, today the Obama administration and a coalition of state Attorneys General announced a $25 billion settlement with five of the nation’s largest mortgage servicers—Bank of America, JPMorgan Chase, Wells Fargo, Citigroup, and Ally Financial—providing much-needed aid to distressed homeowners.
“NCLR (National Council of La Raza) worked tirelessly alongside advocates, housing counselors, and champions within the administration and the Attorney General coalition to reach a strong settlement, which provides critical relief to families who have fallen through the cracks,” stated Janet Murguía, NCLR President and CEO. “The Attorneys General and the administration deserve a great deal of credit not only for giving immediate help to struggling homeowners but for also securing changes to the mortgage servicing system which will prevent these kinds of problems in the future.”
“The foreclosure crisis has had a devastating effect on Latino homeowners, many of whom have lost two-thirds of their wealth and now owe more than their homes are worth,” said Murguía. “This settlement will not repair all of the damage done to Latino homeowners, but it is a first installment of the relief that hardworking families desperately need and a critical step forward in stabilizing the housing market.”
The settlement will allot approximately $17 billion for principal reductions, refinances, and other forms of relief. This deal, coupled with an earlier announcement of major incentives for servicers to prioritize principal reductions, may help break the logjam on write-downs.
An additional $5 billion will be allocated to states to provide housing counseling and legal aid free of charge for families facing foreclosure and for victims of fraud. Congress zeroed out funding for housing counseling in 2011 and subsequently reinstated only about $45 million for the programs in 2012. Yet housing counseling is among the most successful and in-demand foreclosure prevention programs to date. The deal will also require the servicers to alter their servicing practices so that foreclosure prevention is a priority.
“We’re incredibly pleased that this deal thoughtfully invests funds into housing counseling and legal aid—two proven foreclosure prevention approaches that aid the most vulnerable. Borrowers who receive assistance from qualified organizations stand a better chance of receiving a sustainable mortgage modification and keeping their homes,” noted Murguía.
While this settlement does not remove all foreclosure challenges, it is a large piece of the puzzle that will hopefully lead toward broad reform and increased accountability in the mortgage servicing industry.
Geography:California, Far West, Midwest, Northeast, Southeast, Texas