The Office of Mortgage Settlement Oversight officially opened Thursday to monitor the $25 billion agreement between the largest servicers and the 49 state attorneys general.
A federal judge approved the settlement Wednesday, according to court documents disclosed this week. To oversee how the $17 billion in homeowner relief "credits" will be provided and how $5 billion in remediation payments are made, both sides agreed to appoint North Carolina Banking Commissioner Joseph Smith as the official monitor.
"Since the settlement was announced last month, people have understandably paid a great deal of attention to the specifics of the consent judgment — who will pay, who will receive, and how much," Smith said in his first public statement since the settlement was announced in February.
"Those are important matters to determine. But this settlement also serves those who do not participate in the transfer of money: the neighbors of distressed borrowers whose property values stand at risk because of foreclosed properties in their midst, the communities in which they live, the people saving now toward the goal of homeownership, and everyone whose living depends on a robust housing and home finance industry."
The agreement concludes more than one year of negotiations between the AGs, the Department of Housing and Urban Development, the Justice Department and the five largest mortgage servicers over alleged foreclosure abuses and documentation problems.
OMSO will not only oversee how principal reduction and modifications will be handled, but will also ensure servicers abide by new standards in the settlement.
The office will approve internal review groups within the banks and how testing methods will be conducted. Quarterly reports will be issued to the monitor, which will then report the findings to the court and a monitoring committee of state and federal officials.
Servicers are given the opportunity to fix any violation, but can be fined up to $1 million for uncured problems and $5 million for second violations.
"By itself, this settlement will not remedy every problem that system faces. But trust in our mortgage system can move forward if we use this opportunity to show fairness, transparency and accountability," Smith said. "This is a responsibility I take seriously."