For Immediate Release - February 09, 2012

Massachusetts Homeowners to Receive $318 Million in Relief as Part of State-Federal Agreement Over Unlawful Foreclosures and Loan Servicing

AG Coakley Secures Additional “Carve Out” to Continue Litigation over “MERS” and “Ibanez” Claims

BOSTON - A $25 billion nationwide state-federal settlement over unlawful foreclosures, including robo-signing of documents, will bring an estimated $318 million dollars in assistance to Massachusetts borrowers, Attorney General Martha Coakley announced today.  Attorneys General from 49 states have agreed to join the settlement announced today in Washington, D.C. 

Listen to audio from today's press conference:

AG Coakley also secured an additional “carve out” to the agreement to allow her office to continue to pursue further relief in the courts against the banks over two Massachusetts-specific issues.  Those claims include initiating foreclosures without holding the actual mortgages (so-called “Ibanez” violations) and allegedly corrupting the land recording system through the use of the Mortgage Electronic Registration System (MERS).  The agreement will settle all other claims made as part of AG Coakley’s lawsuit against the five banks filed on December 1, 2011. 

“Fixing this foreclosure crisis is one of the most important things we can do to restore a healthy economy,” said AG Coakley. “In Massachusetts, this agreement provides for immediate relief and continued enforcement. The banks will provide an immediate infusion of millions of dollars in relief for struggling homeowners. It also allows our office to continue to pursue our claims against the banks for initiating illegal foreclosures in our state and corrupting our land court system. By no means is this settlement the end of our work seeking accountability and relief, as we are continuing to look at the practices of Fannie Mae and Freddie Mac and are participating in the state-federal task force investigating the practices that led to the collapse of our economy.”

Since 2007, AG Coakley has been a national leader in addressing the foreclosure crisis by holding banks and investment giants accountable for their role in the economic downturn.  Her office has already recovered more than $600 million in relief for Massachusetts homeowners and investors.  AG Coakley’s Office has ongoing investigations into the foreclosure crisis and will continue additional efforts to stabilize the housing market in Massachusetts.

 

NATIONAL STATE-FEDERAL SETTLEMENT

Through this national state-federal agreement, five major lenders are expected to provide approximately $14.6 million in cash payments to Massachusetts borrowers, $257 million worth of mortgage relief, and a direct payment of approximately $45 million to the Commonwealth that will be used to assist homeowners.  The agreement settles allegations of widespread use of fraudulent documents by Bank of America, Wells Fargo, JP Morgan Chase, Citi, and GMAC.

Massachusetts’ estimated total share of the settlement is $317,915,272:

  • Massachusetts borrowers will receive an estimated $224,000,819 in benefits from loan term modifications and other direct relief.
  • Massachusetts borrowers who lost their homes to foreclosure from January 1, 2008 through December 31, 2011 and suffered servicing abuse would qualify for $14,625,790 in cash payments to borrowers.
  • The value of refinanced loans to Massachusetts underwater borrowers would be an estimated $32,729,601.
  • The state will receive a direct payment of approximately $45 million that will be used to assist homeowners.

Under the national agreement, the five servicers have agreed to a $25 billion joint state-national settlement with these components: 

  • Servicers commit a minimum of $17 billion directly to borrowers through a series of national homeowner relief effort options, including principal reduction.  Given how the settlement is structured, servicers will actually provide up to an estimated $32 billion in direct homeowner relief.
  • Servicers commit $3 billion to a mortgage refinancing program for borrowers who are current, but owe more than their home is currently worth.
  • Servicers pay $5 billion to the states and federal government ($4.25 billion to the states and $750 million to the federal government).  The state payments include funding for payments to borrowers for mortgage servicing abuse.
  • Homeowners receive comprehensive new protections from new mortgage loan servicing and foreclosure standards.
  • An independent monitor will ensure mortgage servicer compliance.
  • Government can pursue civil claims outside of the agreement, and any criminal case; borrowers and investors can pursue individual, institutional or class action cases regardless of agreement.

The state-federal settlement resulted from a civil investigation and initiative that began in October 2010.  This investigation included state attorneys general and state banking regulators across the country, and nearly a dozen federal agencies.  The settlement holds banks accountable for past mortgage servicing and foreclosure fraud and abuses and provides relief to homeowners.  With the backing of a federal court order and the oversight of an independent monitor, the settlement seeks to stop future fraud and abuse.

The settlement does not grant any immunity from criminal offenses and will not affect criminal prosecutions.  A separate agreement reached by Massachusetts allows the Commonwealth to pursue allegations that these five banks initiated foreclosures without holding the actual mortgages (so-called “Ibanez” violations) and allegedly corrupted the land recording system through the use of the Mortgage Electronic Registration System (MERS), stated in AG Coakley's lawsuit against the five banks filed on December 1, 2011 .  The settlement does not prevent homeowners or investors from pursuing individual, institutional or class action civil cases against the five servicers.  The agreement also enables state attorneys general and federal agencies to continue to investigate and pursue other aspects of the mortgage crisis, including securities cases.

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. 

 

AG COAKLEY’S LEADERSHIP TO ADDRESS THE FORECLOSURE CRISIS

AG Coakley’s office has already brought numerous actions against major banks and financial institutions with the goal of keeping people in their homes and avoiding unnecessary foreclosures.  These include actions against Fremont , Option One , Countrywide , Morgan Stanley , Goldman Sachs and Royal Bank of Scotland which all resulted in loan modifications designed to remedy unfair and unsustainable loans in Massachusetts.  AG Coakley’s office has recovered more than $600 million in relief for investors and borrowers, helped keep more than 25,400 people in their homes, and returned nearly $60 million in taxpayer funds back to the Commonwealth.

Attorney General Coakley has also agreed to join the Residential Mortgage-Backed Securities task force.  On January 27, U.S. Attorney General Eric Holder, along with Housing and Urban Development (HUD) Secretary Shaun Donovan, announced the formation of the task force.  AG Coakley’s Office will lend Massachusetts expertise regarding its own investigations into the use of mortgage-backed securities which contributed to the financial crisis.  Massachusetts is one of the only states to successfully investigate and settle these types of claims against lenders, returning more than $200 million for borrowers.

The federal-state settlement announced today primarily affects mortgages that are owned and held by the nation’s largest bank servicers.  Fannie Mae and Freddie Mac, however, control a majority of the nation’s mortgage loans.  Leaders of Fannie Mae and Freddie Mac have expressed an unwillingness to participate in federal loan modification programs, including principal forgiveness. In a letter pdf format of Letter to Edward DeMarco re: Fannie Mae and Freddie Mac
 to the acting director of the Federal Housing Finance Agency (FHFA) sent last Thursday, AG Coakley insisted that the FHFA should allow for principal forgiveness, guided by a net present-value analysis, which would increase loan modifications and help stabilize the housing market.

AG Coakley has also filed legislation in Massachusetts as part of this effort to tackle the ongoing foreclosure crisis. The legislation, An Act to Prevent Unnecessary and Unreasonable Foreclosures, filed with State Senator Karen Spilka and State Representative Steven M. Walsh, would set standards for determining when a loan modification, instead of foreclosure, is appropriate and would require creditors to modify loans when an analysis shows that it’s more profitable to modify the loan than to foreclose. The legislation applies to loans that have been identified as having certain risky features, typically associated with subprime loans, and in which the banks knew or should have known were destined to fail.  The legislation would also codify two recent Supreme Judicial Court Decisions, Ibanez and Bevilacqua , by requiring a creditor commencing foreclosure to show it is the current legal holder of the mortgage. With today’s settlement, the provisions included in the loan modification legislation would become a key piece to ensuring the implementation of the settlement and protecting homeowners now and in the future.

More information about AG Coakley’s work during the lending crisis can be on her website .

Borrowers should contact their mortgage servicer to obtain more information about specific loan modification programs and whether they qualify under terms of the state-federal settlement: 

Bank of America: 1-877-488-7814

Citi: 1-866-272-4749

Chase: 1-866-372-6901

GMAC: 1-800-766-4622

Wells Fargo: 1-800-288-3212

More information can be found on the state-federal settlement at the websites below:

www.mass.gov/ago/

www.NationalMortgageSettlement.com

www.HUD.gov

www.justice.gov

Consumers who may have additional questions about the settlement or other concerns can submit a complaint online or call the Attorney General’s dedicated mortgage settlement phone line at (617) 963-2170. Consumers may also contact the Attorney General’s office at the following email address agocs@state.ma.us.

This matter is being handled by Attorney General Martha Coakley’s Consumer Protection Division, including Assistant Attorneys General Amber Villa, John Stephan, Sara Cable, and Justin Lowe; Acting Division Chief David Monahan; Investigator Monique Cascarano of the Investigation Division, Stephanie Kahn, Deputy Chief of the Public Protection & Advocacy Bureau, and Deputy Attorney General Chris Barry-Smith.

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