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.
In Pennsylvania, New Jersey, and 21 other states, lenders must sue homeowners in court to foreclose. In some cases, robo-signed documents have been deemed to be of dubious legality, bordering on perjury.
The settlement announced Thursday, to be filed as a consent judgment in U.S. District Court for the District of Columbia, provides for the first nationwide reform of mortgage-servicing standards and effectively gives state attorneys general oversight of national banks. In addition, the government can continue to pursue civil claims outside the settlement, including securities cases and criminal investigations.
California received the largest share of the settlement, $18 billion. At least one observer of the national foreclosure crisis said he was unimpressed by the agreement.
"I really don't see this as being that big a deal," said Richard Green, of the Lusk Center for Real Estate at the University of Southern California. "The total number of dollars is still small compared to the value of the mortgages that are underwater. To some extent, the numbers reflect losses the lenders would have taken anyway."
Of Pennsylvania's $266 million share of the settlement, $93 million is for loan modifications and direct relief, $21 million will go to cash payments for people who lost their houses, $81 million will go to refinance mortgages on which more is owed than the value of the houses themselves, and $69 million will be in direct payments to the state.
New Jersey's $837.7 million includes $660 million for mortgage modifications, $12.5 million for foreclosed borrowers, $89.5 million for refinancing, and $75.5 million in direct payments to the state.
Housing and Urban Development Secretary Shaun Donovan said the settlement would bring "immediate relief" to the affected homeowners. But the National Association of Attorneys General said the complexity of the agreement likely would mean a three-year process.
It will take 30 to 60 days to select an administrator for the program, and affected borrowers will not immediately know if they are eligible for relief.
Over the next six to nine months, the settlement administrator, the attorneys general, and the mortgage servicers will identify homeowners eligible for the immediate cash payments, principal reductions, and refinancing.
The new mortgage-servicing standards will make foreclosure a last resort by requiring servicers to ensure that there are other options. Banks may not pursue foreclosure while a homeowner is being considered for a loan modification.
Procedures and timelines for reviewing loan-modification applications will be established, and homeowners will have the right of appeal.
"Underwater" homeowners, who owe more on their mortgages than their properties are currently worth, are the ones her group doesn't know now how to help, Clarifi's Hasson said, because the danger of default on the mortgages is not immediate.
"If the [settlement] can help these individuals stave off foreclosure down the road," she said, "then it is worth it."
Who Will Qualify for Help?
Borrowers with mortgages owned or serviced by
the five banks: Ally Financial, JPMorgan Chase, Bank
of America, Wells Fargo, and Citigroup. Collectively, the five service nearly 60 percent of the nation's mortgages.
Homeowners needing loan modifications now, including first- and second-lien principal reduction.
Borrowers who are current on payments but whose mortgages exceed their homes' value can refinance at current low rates.
Borrowers who lost their homes to foreclosure will receive up to $2,000. No proof of financial harm will be needed, and they will still be able to have their cases reviewed by the government and will not have to release private claims against the servicers.
For more information, go to: www.nationalmortgagesettlement.com
SOURCE: National Association of Attorneys General
Contact real estate writer Alan J. Heavens at 215-854-2472, firstname.lastname@example.org, or @alheavens at Twitter.