In the 80s, our national economy suffered major economic losses, which led to major Wall Street Reform and new federal laws implemented by the U.S. Securities and Exchange Commission. You may remember the name “Michael Milken,” the name of the person primarily responsible for selling these high-yield “junk bonds.” Milken was charged with several federal counts of securities fraud and conspiracy. Today, our nation is suffering from a different type of economic harm. The fall of the housing market and bursting of the real estate bubble has led to one of the worst recessions in American history.
On February 9, 2012, five large banks agreed to enter into a formal consent decree with the Attorney General’s Office from each state, excluding Oklahoma, and Washington, D.C. Under the terms of this historical consent decree, the defendants are required to dole out over $25 billion to homeowners and implement new mortgage servicing standards. This historical settlement will lead to the largest nationwide reform the mortgage industry has witnessed, and this reform is long overdue.
The Banks Involved in the Mortgage Settlement
The mortgage settlement involves five mortgage servicers/lenders:
1. Bank of America
2. JPMorgan/Chase
3. Citi
4. Wells Fargo
5. Ally/GMAC
The Terms of the Mortgage Settlement
- Loss Mitigation: The five banks must set aside at least $17 billion to help homeowners modify their home loans to avoid foreclosure.
- Principal Reduction: The five banks must set aside at least $3 billion to help homeowners reduce their mortgages if they’ve kept up with their mortgage payments but owe much more than what their homes are currently worth.
- Foreclosure Victims: Homeowners who lost their homes through foreclosure may be able to receive monetary compensation.
- Education and Foreclosure Prevention: These banks must implement new servicing standards and educational resources to help homeowners avoid foreclosure.
- Staffing Improvements: The five banks have a legal obligation to implement new staffing procedures that streamline the communication process with homeowners. In my opinion, this is the most important aspect of the mortgage settlement. Your lender may be required to provide a single point-of-contact to help you avoid foreclosure.
What Now?
To administer the terms of the mortgage settlement, the parties appointed Joseph A. Smith, Jr., previously the North Carolina Commissioner of Banks, to ensure the five banks’ compliance. Smith now heads the Office of Mortgage Settlement Oversight, a bipartisan, national group that will be able to monitor compliance. You can read more about the Office of Mortgage Settlement Oversight here.
Find Legal Help: If you’re looking for an experienced Virginia real estate attorney, contact Keithley Law, PLLC, PLLC today and schedule an initial consultation in our Fairfax law office.
Call Keithley Law, PLLC, PLLC today at (703) 454-5147 for a case evaluation.
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