A proposed national foreclosure fraud settlement provides an estimated $47.1 million in direct relief to Mississippi homeowners and addresses future mortgage loan servicing practices, Attorney General Jim Hood said Friday in announcing Mississippi’s participation in the $25 billion joint federal-state agreement with the nation’s five largest mortgage servicers over foreclosure abuses and fraud.
The five lenders — Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial — have already agreed to the settlement.
In addition to payments to homeowners victimized by the so-called robo-signings of foreclosure papers initiated by the banks, the settlement funds are to provide Mississippi’s borrowers an estimated $13,192, 086 in benefits from loan modifications and other direct relief.
“This agreement is very significant in how it addresses the fraud that these banks committed against many homeowners across our state,” said Attorney General Hood. “This agreement not only provides much needed relief to Mississippi borrowers, but it also puts a stop to many of the bad behaviors that contributed to the mortgage mess in our state and across the country.”
Mississippi borrowers who lost their home to foreclosure from Jan. 1, 2008 through Dec.r 31, 2011 and suffered servicing abuse would qualify for a total payout of $8,471,180.
Also under the agreement, the value of refinanced loans to Mississippi’s underwater borrowers would be an estimated $11.2 million.
The state will receive a direct payment of $14.2 million, Hood said.
The settlement leaves open avenues for further civil damage recoveries by states and leaves the states and federal government the option to pursue criminal penalties.
On the federal level, U.S. Attorney General Eric Holder along with Housing and Urban Development (HUD) Secretary Shaun Donovan, Securities and Exchange Commission (SEC) Director of Enforcement Robert Khuzami and New York Attorney General Eric Schneiderman have formed the Residential Mortgage-Backed Securities Working Group. The working group will investigate those responsible for misconduct contributing to the financial crisis through the pooling and sale of residential mortgage-backed securities.
Hood said the new agreement addresses breakdowns in the mortgage servicing industry, and allows for investigation of other mortgage-related misconduct. “It also puts in place new protections for homeowners in the form of mortgage servicing standards. These providers now have to take additional steps before they can foreclose on someone’s home. That’s not something we would see if we simply won a money judgment in a trial. A monitor will be put in place to oversee the financial institutions that are covered under the agreement.”
Hood said stiffer criminal and civil penalties are still in order but harsher penalties are still in order but resistance from the Mississippi House of Representatives must be overcome in order to pursue them.
“Some of the culprits of our economic collapse should go to jail. I will continue with our securities suits against some of these banks and the ratings agencies which condoned these fraudulent securities. “These are the very kind of cases our leadership in the Mississippi House of Representatives wants to try and stop me from being able to pursue. They want to strip the Attorney General of power just to make a political statement that sides with corporate wrongdoers and against the best interests of our state.”
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 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, Hood said.