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Marketing $25 Billion AG Settlement to Consumers is Key to Getting Money

posted by Nathalie Martin

Our local AG's office just held a meeting for people who serve homeowners in foreclosure, to explain what the settlement means to consumers. In this blog, I share what I learned. Homeowners in each state that is a part of the settlement (sorry Oklahoma) will receive tens of millions of dollars for forgiving principal on loans, refinancing for borrowers who are current but under water, and direct payments to those whose homes were foreclosed between January 1, 2008 and December 31, 2011.  KEY FACT: Because people need to apply for these funds, education and outreach is essential. Please circulate this information as far and wide as you can.  The funds are available for three years, and funds not used are retained by the banks. Five pots of money are available, and I’ll provide the New Mexico estimates where available just so you can see the proportions, but each state’s numbers are different and most will be much higher.

First, there will be money for those who are delinquent and whose loans are serviced by the five settlement banks (BAC, JPMorgan, Wells Fargo, Citi, and GMAC/Ally) (these funds are estimated to be about $63,000,000 in New Mexico). These funds are available for various types of assistance, including principal reduction or forbearance. Information and application forms can be found on most state AG’s web sites. As part of the settlement, banks agreed to 45 pages worth of servicing standards. The activities of the banks are subject to independent review by a former bank commissioner from North Carolina who will have “unfettered” access. AGs also have access and oversight. There are penalties for non-compliance, though I am not sure if there are third party beneficiary rights.

Second, moneys are earmarked for homeowners who are behind but cannot refinance because they are under water, as long as the homeowner's note is owned (as opposed to just serviced) by the five settling banks (an estimated $2,500,000 in New Mexico). It looks as though notes in a trust administered by one of the settling banks are eligible for this benefit as well. Third, money is set aside for state financial services, and fourth for foreclosure prevention. 

Fifth and finally, homeowners whose homes were foreclosed between January 1, 2008 and December 31, 2011 are eligible for direct payments. These funds are not meant in any way to compensate for the loss of the home, just to say “I’m sorry.” These funds are estimated to be in the range of $1,500 to $2,500 per lost home Nationwide, depending on how many people apply.

There also will be some other assistance including deferred payments for homeowners, relocation assistance, waiver of some deficiency balances, and funds for fixing blighted properties. AG's offices will also get funds to ameliorate the problem however they see fit.

What steps must consumers follow to take advantage of the settlement? Each servicer will have its own process, but consumers should contact their local AG's office and that office’s web site. Also check out this amazing web site that explains the settlement in clear terms, through diagrams.

We are lucky here in New Mexico, that the local AG’s office is so transparent.  Part of their meeting Friday was dedicated to brainstorming about how to get the word out to consumers.  Nothing could be more important in the context of this settlement, because servicers will only pay these high dollar settlement figures if people apply. The settlement website will be updated with helpful information and details on how to proceed as information becomes available, so help us spread the word.

These details are good to know, but the $25 billion question remains. Following robo-signing, fraudulent documents, incomplete ownership trails etc., will servicer behavior change? If not, won’t more liability follow for the servicers? If so, how will servicersaccomplish change? Better staffing? Better settlement opportunities for borrowers? Distribution of much of these funds is still in the discretion of the servicers, so one can only hope we see real change. I am a bit similar to those buyers in the  Shaken faith cases.  To quote my father, I am hopeful for change, but I’ll believe it when I see it.


Nothing I've read makes me think that the settlement is a good deal for We, The People.

The numbers are too small to make the victims whole, they're too small to be punitive, too small to make them change their behavior. There are too many hoops to jump through, too much discretion given to organizations that have proven themselves entirely untrustworthy.

Forget it.
Revoke their bank charters.

All underwater mortgages for primary residences should be reset to current market value regardless of whether they are in foreclosure or not. Banks have been paid repeatedly and now we need to stabilize the market. Mark to market, let capitalism rule. Then we incentivize staying in property, dis incentivize bAnks from using foreclosure for profit and stabilize the market. Not everyone wins equally, but then, when ever do they? The point is to stabilize The market.

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