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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.
-
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.
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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.
-
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
http://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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