The 14 largest U.S. mortgage servicers have reached an initial settlement with attorney generals saying, amongst other things, that they must pay back homeowners for losses from foreclosures or loans that were mishandled in the wake of the housing collapse.
Officials from the Justice department, the Department of Housing and Urban Development and 10 state attorneys general met with banks today, the second such meeting to negotiate a global settlement, Associate U.S. Attorney General Tom Perrelli said. The group is discussing potential fines and whether servicers should be required to reduce the principal on some home loans.
The banks, including JPMorgan Chase & Co. (JPM) and Wells Fargo & Co. (WFC), agreed in the settlement to conduct a review of all loans that went into foreclosure in 2009 and 2010. They also agreed to improve their foreclosure, loan modification and refinancing procedures by hiring staff, upgrading document-tracking systems, assigning a single point of contact for each borrower and policing lawyers and vendors.
The companies also agreed to end the practice of dual-track foreclosures, in which servicers seize the homes of delinquent borrowers even while negotiating lower mortgage payments.
This is good news for many homeowners who lost their homes to illegal foreclosures and to those homeowners who will battle foreclosure in the future. It’s important to note that the initial settlement does not include an exact monetary amount that homeowners will receive. However, the independent investigations conducted on the mortgage servicers should produce information which will determine an exact and supposedly fair dollar amount. Of course one of the big concerns is that the compensation awarded to homeowners won’t be nearly enough to cover the damage caused by illegal foreclosures.