Good news for homeowners who are struggling with foreclosures in the nation: Last week, U.S. Attorney General Eric Holder, the Department of Housing and Urban Development Secretary Shaun Donovan and several state attorney generals announced that they had reached a landmark $25 billion agreement with the nation’s five largest mortgage servicers to address the mortgage loan industries’ servicing and foreclosure abuses.
The agreement provides substantial financial relief to homeowners and establishes significant new homeowner protections for the future. Data has shown that Black homeowners across the nation have been hardest hit by these practices.
The deal is the result of an extensive investigation by government agencies, including the Department of Justice. Bank of America Corporation, JPMorgan Chase & Co., Wells Fargo & Company, Citigroup Inc. and Ally Financial Inc. (formerly GMAC) are a part of the deal.
“This agreement-the largest joint federal-state settlement ever obtained-is the result of unprecedented coordination among enforcement agencies throughout the government,” said Holder. “As a result, struggling homeowners throughout the country will benefit from reduced principals and refinancing of their loans. The agreement also requires substantial changes in how servicers do business, which will ensure that the abuses of the past are not repeated.”
The joint federal-state agreement requires servicers to implement comprehensive new mortgage loan servicing standards and to commit $25 billion to resolve violations of state and federal law.
“It was wrong, and it cost more than 4 million families their homes to foreclosure,” said President Barack Obama. “Even worse, many companies that handled these foreclosures didn’t give people a fighting chance to hold onto their homes. In many cases, they didn’t even verify that these foreclosures were actually legitimate.”
In New York State, Attorney General Eric Schneiderman announced that $136 million has been secured for the state. New York is the fourth highest paid state in the settlement agreement and Schneiderman said that even with the settlement, he plans to continue to investigate the mortgage crisis and its impact on New York.
“For a year, the proposed settlement was simply inadequate, and I applaud all those who fought with us to hold banks accountable for their role in the foreclosure crisis, provide meaningful relief to New York’s struggling homeowners and allow a full airing of the facts to ensure that abuses of this scale never happen again,” said Schneiderman.
Black and Latino New Yorkers were five times more likely to be given risky, high-cost loans, according to a report by New York Communities for Change. Homeowners of color were also less likely to receive mortgage modifications than white homeowners.
State Sen. Malcolm Smith, who represents a large number of Black homeowners in Southeast Queens, said that under the proposed agreement reached by the attorney general, homeowners will receive between $1,500 to $2,000 in retribution for the bad mortgages. In comparison to the financial injuries suffered by homeowners, these amounts, he believes, are unfair and insulting.
“Home purchasing is the largest single investment that individuals make in their lifetimes. Banks committed crimes against homeowners and restitution needs to be fair,” Smith said. “I applaud the efforts of Attorney General Eric Schneiderman to bring the banks to task for their erroneous dealings with home buyers.”
State Sen. Jose Peralta said that the money being received could be best used for the Foreclosure Prevention Services Program. Representing East Elmhurst and Corona, Queens, which also have a high number of homeowners struggling with foreclosure issues, he said that prevention programs have helped stop 14,000 foreclosures in his district.
“The housing counseling and legal assistance funded through the program has been invaluable to countless homeowners. Funding for the $25 million program runs out next month. With more than three in four New York City residents going into foreclosure court without a lawyer, it would be an understatement to say we need to keep the Foreclosure Prevention Services Program up and running.”