WASHINGTON, DC: North Carolina communities will benefit from millions of dollars to help struggling homeowners facing foreclosure, as well as more housing counselors, financial fraud investigators and prosecutors, and stronger mortgage standards, Attorney General Roy Cooper said Thursday.
Cooper and other state attorneys general reached a landmark agreement worth up to $37 billion with the nation’s five largest mortgage servicers: Bank of America Corporation, JPMorgan Chase & Co., Wells Fargo & Company, Citigroup, Inc., and Ally Financial, Inc. (formerly GMAC) this week.
The historic state-federal settlement will help lower mortgage payments for struggling homeowners through reduced rates or principal. Also, new rules for mortgages will prevent unnecessary and improper foreclosures.
“This agreement is about helping homeowners who tried to make good but were wronged,” Cooper said. “Just as important, it looks forward by establishing a clear set of rules to make sure foreclosures are done correctly and fairly.”
National funds coming to North Carolina and homeowners total $338 million and include the following:
- About $63.7 million to provide for housing counselors, legal help, financial fraud detection and prosecution, general economic reparation for the state and fines and penalties which go to the public schools;
- Payments to North Carolina foreclosure victims: $33.57 million
- Principal reduction, short sales or other help to homeowners at risk of default: $179.51 million
- Refinancing loans at a lower rate for homeowners current on their payments but who owe more than their house is worth: $61.52 million
The agreement also prohibits many past foreclosure abuses, such as robo-signing and inadequate documentation. The banks will have to meet tough new standards. Under the agreement, banks must:
- Weigh other loan mitigation options first, making foreclosures a last resort, and providing customers with information on those options;
- Prohibit foreclosure while the homeowner is being considered for a loan modification
- Give homeowners a single point of contact at the bank, and adequate staff to ensure customers get assistance.
- Allow homeowners to appeal denial of loan modification applications.
- Restrict default fees, late fees, 3rd party fees and force-placed insurance, which can total more than a monthly mortgage payment.
“Some foreclosures have to happen, but they must be done correctly and fairly,” Cooper said. “While this should have been the standard all along, our investigation has shown that it wasn’t, and it might never have been without this settlement.”
An independent monitor has been appointed to make sure banks follow the agreement. At Cooper’s request, NC Banking Commissioner Joe Smith will serve as the national monitor, working from Raleigh to oversee implementation.
“This agreement lets our states and our country move forward,” Cooper said. “It means that owning a home and staying in it—for many American families the biggest investment they’ll ever make—is possible. And that communities damaged by vacant homes may get new life.”
The massive enforcement effort launched in October 2010 as state attorneys general, state banking regulators, and nearly a dozen federal agencies joined forces to investigate mortgage servicing and foreclosure abuses.
The state of North Carolina’s $64 million will be divided among housing counselors, Legal Aid of North Carolina and other organizations through the NC Housing Finance Agency. In addition, the state will get more investigators and prosecutors to stop financial fraud in the future, and money to repay the state’s economy for the damage caused by the housing crisis. (See attached chart
“This agreement puts money back into deserving homeowners’ pockets,” Cooper said. “It means restitution for people whose homes were taken from them wrongly, and it lowers the amount of interest owed by homeowners who are current on their bills but whose loans far exceed the value of their homes.”
North Carolinians who are eligible for direct relief from the settlement will be contacted by their mortgage servicer or the settlement administrator in coming months.
The agreement is expected to help all homeowners, not just those eligible for relief under the settlement, by reducing foreclosures and stabilizing home values.
All states and territories had the opportunity to sign on to the agreement negotiated by Cooper, the other attorneys general and federal authorities. The final agreement will be filed in U.S. District Court in Washington, D.C. and will have the authority of a court order. States then plan to pursue similar agreements with other mortgage servicers.
Homeowners or investors can still pursue individual, institutional or class action civil cases against the banks, and the settlement in no way releases banks from the possibility of prosecution by criminal authorities.