Attorney General Koster announces Missouri consumers, state to receive more than $196 million in benefits from national mortgage settlement

Jefferson City, MO – February 13, 2012 – (RealEstateRama) — Attorney General Chris Koster today announced Missouri’s participation in a landmark national mortgage settlement that will bring more than $196 million to Missouri taxpayers and the state. The joint federal-state agreement addresses allegations of foreclosure abuses, unfair mortgage servicing practices, and fraud by the nation’s five largest mortgage servicers: Bank of America, Citigroup, JPMorgan Chase, Wells Fargo, and Ally Financial.

“This settlement provides much needed relief to a broad spectrum of Missourians: those who have already been foreclosed on, those who are current on their payments but underwater on their mortgages, and those who are struggling with their current payments but could make more reasonable ones,” Koster said. “Through millions of dollars in principal reductions, this settlement makes it easier for Missourians to stay in their homes.”

Missouri consumers will be eligible to receive the following benefits under the settlement:

• Borrowers whose homes are worth less than they owe and who are current on their payments will be able to refinance, saving Missouri homeowners an estimated $38 million.
• Borrowers whose homes are worth less than they owe and are behind on their payments but who could afford to make them at a reduced rate will receive an estimated $86.5 million in principal reductions and other borrower assistance programs.
• Borrowers who lost their homes to foreclosure from January 1, 2008, through December 31, 2011, and suffered servicing abuse will receive roughly $31 million in direct payments, roughly a $2,000 cash payment to each borrower.

The Attorneys General also negotiated direct payments to the states. Attorneys General have the discretion on how these funds are used. Koster said that because the state is facing severe budget shortages, he will direct more than $40 million to the state’s general revenue fund to be used in the state budget. Governor Jay Nixon has announced he will use the $40 million to restore funding for the state’s public colleges and universities.

“This settlement even helps homeowners who cannot benefit from the refinancing programs by imposing comprehensive new standards for mortgage loan servicing and foreclosures,” Koster said. “The settlement also creates an outside monitor to ensure compliance by the five settling financial institutions.”

Among the new mandated servicing and foreclosure practices, the settlement requires lenders:

• to implement standards for executing documents in foreclosure cases;
• to make certain disclosures to consumers in advance of foreclosure;
• to implement standards to ensure account and default fee accuracy;
• to help consumers avoid foreclosure through outreach and communication regarding loan modification status;
• to designate a single point of contact to assist borrowers trying to refinance to avoid foreclosure; and
• to end dual-track foreclosures where consumers are foreclosed on as they were trying to modify their loan.

The settlement does not rule out the possibility of criminal prosecutions, including the indictment Attorney General Koster announced earlier this week against DOCX, LLC and its former president, Lorraine Brown. Nor does it prevent homeowners or investors from pursuing individual, institutional or class action civil cases against the five servicers.

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

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.

The Missouri Attorney General’s Office has launched a special hotline where consumers can get more information about the settlement. The hotline number is 855-870-7676. Consumers can also visit these websites to get more information:

http://ago.mo.gov/mortgageSettlementInfo.htm
http://www.nationalmortgagesettlement.com/
http://www.hud.gov/
http://www.doj.gov/