$25 billion 'robo-signing' settlement reached with five banks

The attorneys general of 49 states and the federal government reached a $25 billion agreement Thursday with five of the nation's biggest lenders - Ally Financial, JPMorgan Chase, Wells Fargo, Citigroup, and Bank of America - to end mortgage-servicing and home-foreclosure abuses stemming from so-called "robo-signing" practices.

New Jersey's share of the settlement is $837.7 million; Pennsylvania's share totals $266 million. Only Oklahoma did not sign the long-anticipated accord.

An estimated 1.8 million borrowers whose mortgages are owned or serviced by the five lenders are covered by the settlement. The agreement does not apply to loans owned by Freddie Mac or Fannie Mae, about 50 percent of all U.S. mortgages. (Borrowers can check at www.fanniemae.com/loanlookup and www.freddiemac.com/mymortgage.)

Under the settlement, up to one million mortgage holders will have their debt reduced or be able to refinance at lower interest rates. About 750,000 borrowers who lost their homes to foreclosure between Jan 1, 2008, and Dec. 31, 2011, will receive compensation checks for about $2,000.

New Jersey Attorney General Jeffrey S. Chiesa said the settlement "addresses breakdowns in the mortgage-servicing industry and allows us to pursue other mortgage-related misconduct."

Pennsylvania Attorney General Linda Kelly urged borrowers to be patient, saying, "Eligible consumers will receive letters or claims' forms as this process moves forward."

Kelly also cautioned borrowers to beware of people who might try to use the settlement to scam them.

States will receive direct payments to fund consumer-protection and foreclosure-protection efforts.

Patricia Hasson, president of Clarifi, a Philadelphia-based organization that helps distressed homeowners in Pennsylvania and New Jersey, said Pennsylvania's $69 million direct payment should be used for the Homeowners Emergency Mortgage Assistance Program, which has saved thousands from foreclosure over 30 years. Gov. Corbett has not included funding for HEMAP in his last two budgets.

Robo-signing revelations began to make headlines in fall 2010, as the number of home foreclosures continued to spiral upward in the United States. Some mortgage servicers were found to have not read foreclosure documents before submitting them to the courts or other agencies for action.