Judge signs $25 billion foreclosure settlement
[Update 1: Adds comment from HUD Secretary Shaun Donovan]
It's official: A federal judge approved the $25 billion robo-signing settlement with the top-five mortgage servicers, according to court documents.
U.S. District Court judge for the District of Columbia Rosemary Collyer signed documents that were made public Thursday.
The agreement with the 49 state attorneys general, the Justice Department and the Department of Housing and Urban Development settles a wide-range of foreclosure abuses from improperly prepared affidavits to allegedly forged notarization signatures and botched modification attempts.
The five servicers, Bank of America (BAC), Wells Fargo (WFC), JPMorgan Chase (JPM), Citigroup (C) and Ally Financial will provide $17 billion in different forms of homeowner relief, $5 billion in remediation payments to borrowers and $3 billion in fines to the states.
Because of the way the relief was structured into partial credits, the total amount of principal reduction and other actions could total as high as $40 billion, according to some government estimates.
The deal was originally announced in February after more than one year of negotiations, and it was filed in court in March.
The Association of Mortgage Investors were expected to file a motion to stop the settlement, arguing principal reduction conducted from the settlement would unfairly harm investors in private-label securitizations.
Iowa AG Tom Miller's office, which led the negotiations previously said the banks committed to doing most of the principal write-downs on portfolio loans.
"These consent judgments formalize this historic joint state-federal settlement," Miller tells HousingWire. "This is an important step in paving the way for relief direct relief to consumers across the country, holding the biggest banks accountable, reforming mortgage servicing standards, and giving the green light to the independent monitor."
HUD Secretary Shaun Donovan, who was instrumental in getting California to join the settlement, said he expects up to 2 million homeowners to benefit from the relief.
"From day one the settlement was about helping homeowners, and specifically it was about helping those homeowners who suffered at the hands of the practices of these servicers," Donovan said. "Moreover, while we know that servicing did not cause the mortgage crises it made the problem worse. Moving forward, lenders now have servicing standards that will protect borrowers."