McKenna: National Mortgage Settlement Providing Huge Benefits to Borrowers

Editor's Note: The following is a press release issued this week by the State Attorney General's Office.

SEATTLE – An independent report released this week shows that more than 7,000 Washington state residents have received new loan terms because of last March’s national mortgage settlement.

“Borrowers in Washington state struggling to keep roofs over their heads have received more than $521 million in benefits from this settlement so far,” said Washington State Attorney General Rob McKenna. “The settlement is doing exactly what was intended: providing loan modifications and refinances. Short-sale balances are being forgiven. Some borrowers receive lower principal amounts on their loans. It’s a new lease on life for people who really need it.”

The Office of Mortgage Settlement Oversight, run by Joseph A. Smith and set up to oversee the progress of the historic agreement between the five biggest mortgage servicers, the federal government and all 50 states, says borrowers have received a total of $21.92 billion in value so far. Smith cautions that today’s figures are preliminary and not all of the relief provided is calculated as dollar-per-dollar credits toward the $25 billion in relief detailed in the settlement. But the numbers do give reason for optimism.  

“The relief the banks have reported is encouraging,” said Smith in a statement. “The report discloses that the banks have completed $21.9 billion in consumer relief to borrowers between March 1 and September 30, 2012, and have an additional $4.2 billion still in active trial modifications. Borrowers have received $6.3 billion in the form of either first or second lien principal relief.”

In fall 2010, loan servicers acknowledged that they had been processing home foreclosures without obtaining documents that established the origin of the loans. State and federal enforcement agencies helped stop improper foreclosure practices, compel the companies to establish more effective monitoring and ultimately determine appropriate remedies for affected homeowners.

Washington and seven other states – Iowa, Illinois, Florida, Texas, Colorado, Connecticut and North Carolina – were selected to serve on the negotiating team that spearheaded the investigation and settlement negotiations on behalf of states and banking regulators including the Washington Department of Financial Institutions.

The settlement, announced in February, provides as much as $25 billion in relief to distressed borrowers and direct payments to states and the federal government. It settles state and federal investigations finding that the country’s five largest mortgage servicers were routinely engaged in mortgage servicing and foreclosure abuses. It provides benefits to borrowers whose loans are owned by the settling banks as well as to many of the borrowers whose loans they service.

Those whose loans are serviced by Ally/GMAC, Bank of America, Citi, JPMorgan Chase or Wells Fargo are encouraged to visit www.nationalmortgagesettlement.com to learn more about who qualifies for assistance. McKenna’s office also provides resources to borrowers at www.atg.wa.gov.