Monday, June 10, 2013

Borrowers to receive $33M in compensation for mortgage servicer abuse

Virginia Attorney General Ken Cuccinelli

Virginia Attorney General Ken Cuccinelli

The Virginia Attorney General’s Office announced today that more than 22,500 Virginia mortgage borrowers who were foreclosed upon will receive checks this week for approximately $1,480 each as part of a national settlement. Attorney General Ken Cuccinelli helped negotiate with the nation’s five largest mortgage lenders.  The payouts are to compensate the borrowers for abuses by their lenders and will total just over $33 million.

“These payments are part of the National Mortgage Settlement we negotiated and are meant to help compensate borrowers for abuses by the banks, such as not offering the borrower ways to avoid foreclosure, losing documents submitted in support of a loan modification, overcharging consumer fees that contributed to delinquency in payments, and robo-signing,” Cuccinelli said.

Claim payments will be mailed to borrowers this week, from June 10 through June 17.  Borrowers will receive checks and an explanatory letter from Cuccinelli.  The payment does not limit a borrower from filing a separate lawsuit or making other claims against the lenders.

“We wanted to make borrowers aware that the checks were coming this week or early next week and that they were real and not part of some mortgage scam,” Cuccinelli said.

The borrowers eligible for the payment were those who had their mortgages serviced by one of the settlement’s five participating mortgage servicers, lost their homes to foreclosure between January 1, 2008, and December 31, 2011, and already submitted valid claim forms.  The participating servicers are Ally (formerly GMAC), Bank of America, Citi, JPMorgan Chase, and Wells Fargo.

In February 2012, 49 state attorneys general and the federal government announced the joint state-federal National Mortgage Settlement with the country’s five largest mortgage servicers.  In addition to this $33 million in direct payments to borrowers coming this week, 13,409 Virginian households have also received an additional $933 million in consumer relief to date.  The bulk of this total includes:

  • $103 million (1,115 households) for first lien principal reduction loan modifications.  This is where part of the loan principal is forgiven, i.e., the amount of the loan is reduced to make the mortgage more affordable;
  • $264 million (3,736 households) for completed second lien extinguishments.  This is where the entire amount of a second lien (e.g., a home equity line) is forgiven and the lien is released;
  • $300 million (3,143 households) for approved short sales with deficiency forgiveness.  This is where a servicer approves a short sale (allowing property to be sold for less than the amount of the loan) and then forgives the remaining loan balance;
  • $109 million (2,390 households) for approved and completed underwater refinance loans.  This is where an underwater loan (the loan balance is higher than the value of the house) is refinanced at a lower rate, which provides long term savings to the borrower;
  • $117 million for other deficiency waivers.  When there is a foreclosure, if subsequent sale of the property does not satisfy the loan obligation, the mortgage servicer can still pursue the borrower for the amount that remains owed.  Several of the relief categories above include deficiency waivers.  This one just catches any deficiency waiver that is not already caught in the other relief categories.

The attorney general’s office does not yet have consumer numbers broken down by region.

Every borrower who filed a claim will receive a letter regarding the outcome.  Borrowers with questions about their National Mortgage Settlement payments should call the settlement administrator at 1-866-430-8358. 

A relatively small number of borrowers who filed approved claims will not receive checks this week or will receive split payments if they fall into the following categories:

  • Some borrowers will receive evenly split payments if they divorced or separated and no longer live at the same address.
  • Some who submitted claim forms but did not have valid Social Security numbers on file will have their payments delayed while tax-related issues are addressed.
  • Two banks recently provided information on an additional 31,000 borrowers nationwide who were eligible for payments, but the information was submitted too late to be included in this distribution.  These consumers will receive notices later this summer and will have the opportunity to submit payment applications.

More Information: 

February 2012 News Release

Attorney General Cuccinelli’s NMS Resources

Clarification:  National Mortgage Settlement and Independent Foreclosure Review payments are separate

The Independent Foreclosure Review (IFR) settlement is unrelated and separate from the National Mortgage Settlement and does not include the same government agencies.  The IFR payments began in mid-April 2013, and the Office of the Comptroller of the Currency (OCC) announced that final payments will be mailed in mid-July.  For more information on the OCC Independent Foreclosure Review settlement, go to and click on Independent Foreclosure Review.

Posted By Valerie Garner

Categories: Business, Politics, State Politics

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