Five of the nation’s biggest banks have agreed to pay New York a total of $25 million to settle claims brought by New York State Attorney General Eric Schneiderman regarding their use of a private national mortgage electronic system.
The agreement, filed in federal court Tuesday, resolves certain monetary claims by the New York attorney general against Ally Financial Inc., Bank of America Corp., Citigroup Inc., J.P. Morgan Chase & Co. and Wells Fargo & Co.
The agreement preserves the New York attorney general’s right to sue for damages suffered by consumers …
In a conference call on Feb. 14, Secretary Shaun Donovan of the Department of Housing and Urban Development promised about 90 mortgage-backed bondholders that the $25 billion national mortgage settlement would include a 15 percent cap on the number of investor-owned loans that the five settling banks would be permitted to modify, according to the three participants in the call.
Donovan made the promise in response to MBS investor concerns that banks would shift the cost of the settlement onto their shoulders by writing down the principal in securitized mortgages, rather than in the loans banks hold in their own portfolios. He had already said in a press conference that the settlement would provide incentives for the settling banks — Bank of America, JPMorgan Chase, Citigroup, Wells Fargo, and Ally Financial — to reduce the principal in their own portfolio loans, estimating that “a relatively small share, in the range of 15 percent” of the write-downs would be in investor-owned mortgages. In the Feb. 14 call with bondholders, according to the three participants, Donovan went a step farther, assuring MBS investors that the written settlement agreement would limit the percentage of investor-owned loans the banks were permitted to modify.
Best way to rob a bank is to own one – William Black
Reuters-
Top banks impeded a federal inquiry into their foreclosure processes, according to a report released Tuesday, dragging their feet on turning over documents and blocking investigators’ attempts to interview bank employees.
The inquiry led to the wide-ranging $25 billion mortgage settlement with the five largest mortgage servicers that was announced last month and filed in federal court on Monday.
But the banks hampered an early investigation into whether they were pursuing unlawful foreclosures through shoddy paperwork and lax controls, the inspector general’s office at the U.S. Department of Housing and Urban Development said in its report.
Bank of America (BAC.N), for example, provided only excerpts of files, incomplete documents, and conflicting information to government investigators, and refused to provide some of its foreclosure policies.
It also limited employee interviews, and refused to let employees answer certain questions, the report said.
As Abigail Field says “I thought the indictment that led to the far-too-weak settlement was damning enough;” check out the HUD OIG reports:
Audit Reports
The following reports disclose conditions noted during the identified audit period. They do not necessarily reflect current conditions at the subject auditee. Any questions regarding the current status of corrective actions recommended in these reports should be directed to the report addressee.
FEATURED
To save time we have provided these quick access links to the recently featured Audit Memorandums. You can also find all memorandums in their respective state sections with summaries.
The $25 billion mortgage servicing settlement means more due diligence work for servicers when assessing the work of law firms and other third parties assisting with foreclosures and bankruptcies.
The national mortgage servicer settlement involving the nation’s top five mortgage servicers shows firms taxed with ensuring that all law firms, trustees, subservicers and other third parties handling foreclosure or mortgage servicing activities are in line with best practices outlined in the settlement agreement.
The settlement, agreed to in February, was officially filed with the court on Monday.
Servicers are required to survey the firm’s qualifications, practices, information security for document handling and financial viability, according to settlement documents.
This famous postgame rant from former Arizona Cardinals coach Denny Green after his team’s epic meltdown on Monday Night Football against the Bears could just as easily apply to my reaction to reading the official terms of the Attorney General Foreclosure Settlement (the “AGFS”), filed today. The nation’s largest banks get off with a relatively small penalty (much of it paid by investors or in “credits” for things the banks should already be doing) in return for releases across a broad spectrum of misconduct that pervades just about every dark corner of mortgage servicing. The categories of servicer misconduct are laid out in detail in the complaint filed today in D.C. Federal Court, and include the following:
Providing false or misleading information to borrowers,
Overcharging borrowers and investors for services of dubious value,
Denying relief to eligible borrowers,
Foreclosing on borrowers who were pursuing loan mods in good faith,
Submitting forged or fraudulent documents and making false statements in foreclosure and bankruptcy proceedings
Losing or destroying promissory notes and deeds of trust,
Lying to borrowers about the reasons for denying their loan mods,
Signing affidavits without personal knowledge and under false identities,
Improperly charging excessive fees related to foreclosures,
Foreclosing on servicemembers on active duty,
Making false claims to the government for insurance coverage, and
Being unorganized, understaffed, and generally slower than molasses to respond to borrowers desperately in need of relief, while servicing fees continue to accrue.
57. In the course of their conduct, management and oversight of loan modifications in the plaintiff States, the Banks have engaged in a pattern of unfair and deceptive practices.
58. The Banks’ failure to discharge their required loan modification obligations, and related unfair and deceptive practices, include, but are not limited to, the following:
a. failing to perform proper loan modification underwriting;
b. failing to gather or losing loan modification application documentation and other paper work;
c. failing to provide adequate staffing to implement programs;
d. failing to adequately train staff responsible for loan modifications;
e. failing to establish adequate processes for loan modifications;
f. allowing borrowers to stay in trial modifications for excessive time periods;
g. wrongfully denying modification applications;
h. failing to respond to borrower inquiries;
i. providing false or misleading information to consumers while referring loans to foreclosure during the loan modification application process;
j. providing false or misleading information to consumers while initiating foreclosures where the borrower was in good faith actively pursuing a loss mitigation alternative offered by the Bank;
k. providing false or misleading information to consumers while scheduling and conducting foreclosure sales during the loan application process and during trial loan modification periods;
l. misrepresenting to borrowers that loss mitigation programs would provide relief from the initiation of foreclosure or further foreclosure efforts;
m. failing to provide accurate and timely information to borrowers who are in need of, and eligible for, loss mitigation services, including loan modifications;
n. falsely advising borrowers that they must be at least 60 days delinquent in loan payments to qualify for a loan modification;
o. miscalculating borrowers’ eligibility for loan modification programs and improperly denying loan modification relief to eligible borrowers;
p. misleading borrowers by representing that loan modification applications will be handled promptly when Banks regularly fail to act on loan modifications in a timely manner;
q. failing to properly process borrowers’ applications for loan modifications, including failing to account for documents submitted by borrowers and failing to respond to borrowers’ reasonable requests for information and assistance;
r. failing to assign adequate staff resources with sufficient training to handle the demand from distressed borrowers; and
s. misleading borrowers by providing false or deceptive reasons for denial of loan modifications.
Due to public interest in this case, the Department of Justice is releasing documents that may not be in an accessible format. If you have a disability and the format of any material on the site interferes with your ability to access some information, please email the Department of Justice webmaster at webmaster@usdoj.gov or contact Alisa Finelli at 202.514.2007. To enable us to respond in a manner that will be of most help to you, please indicate the nature of the accessibility problem, your preferred format (electronic format (ASCII, etc.), standard print, large print, etc.), the web address of the requested material, and your full contact information so we can reach you if questions arise while fulfilling your request.
HAWAII SENATE CONCURRENT RESOLUTION S.C.R. NO. 39 – NEEDS YOUR SUPPORT ANDTESTIMONYBEFORE MARCH 13, 2012 at 10:15 A.M.
Deadly Clear-
In an effort to get the Hawaii Attorney General’s focus on the fraudulent documents filed in the Hawaii Bureau of Conveyances, the Hawaii Senate drafted a Concurrent Resolution in cooperation with the House Representatives:
Does anyone care how many lives were destroyed by these banks and continue to get hammered everyday??
NICK TIMIRAOS-
Banks won a handful of concessions in the landmark $25 billion settlement of alleged foreclosure abuses, as federal officials struck a balance between their desire to be tough on lenders and the need to provide immediate relief to the housing market.
A key sticking point in the year-long negotiations was how to structure mortgage write-downs, and who should bear the losses.
The banks that are party to the settlement—Ally Financial Inc., Bank of America Corp., Citigroup Inc., J.P. Morgan Chase & Co ., and Wells Fargo & Co .—heavily and publicly resisted initial government proposals that they absorb the hit for write-downs of loans held by investors for which the banks collect payments. They argued that doing so amounted to transfers of wealth to Fannie Mae, Freddie Mac, and investors in mortgage-backed securities such as hedge funds and pensions.
A previously announced $25 billion settlement between five major banks accused of abusive mortgage practices and government officials will be filed in federal court on Monday, people familiar with the matter said late Friday.
The pact unveiled Feb. 9 is expected to result in payments and other mortgage relief for about one million borrowers, but must first be approved by a judge.
Bank of America Corp, Wells Fargo & Co, JPMorgan Chase & Co, Citigroup Inc and Ally Financial Inc agreed to the settlement after 16 months of negotiations with state attorneys general and federal agencies, including the U.S. Justice Department and the U.S. Department of Housing and Urban Development.
But the fine print took another month to finalize.
Negotiators had hoped to file a settlement on Friday, but the deal was held up at the last minute over a disagreement between Nevada and Bank of America, people familiar with the matter said.
Just when you’ve thought you’ve seen, read it all.
David Dayen-
I think my disgust over federal housing policy is just about complete. As you know, we’re still waiting for the actual terms of the foreclosure fraud settlement, more than one month after the announcement. But more information has dribbled out, not much of it to the good. Michael Hiltzik rounded up some of the more troubling issues. He mentions that OCC penalties will get folded into the settlement, basically charging $0 for their violations. The Federal Reserve did the same thing. He mentions the Ted Gayer study showing that only 500,000 borrowers will even be eligible for the principal reduction in the settlement, half of what HUD and other regulators promised. And he adds that the Treasury Department restored all HAMP incentive payments for servicers who failed to meet their obligations under the programs. As Hiltzik writes, “If the banks had shown as much forbearance toward their struggling borrowers as these three agencies have shown toward the banks, the foreclosure settlement wouldn’t have been necessary in the first place.”
After years of incompetence, intransigence, malevolence and whatever else may explain how mortgage companies have managed to screw over millions of troubled American homeowners, a fix is finally at hand.
Officials have presented the deal as justice for the so-called robo-signing scandal, whereby major mortgage companies improperly foreclosed on millions of properties. They have touted its centerpiece: a $20 billion fund stocked with fines paid by the mortgage companies, which will deliver relief to as many as 1 million troubled borrowers via lowered monthly payments, principal reduction and refinanced loan terms.
Someday the mortgage settlement will be filed in court and thus we will get to see its terms. Which day? Who knows—the latest deadline, the end of February, passed in silence, and annual reports filed at the end of the month with the SEC by Wells Fargo, JPMorgan Chase and Ally Bank, three putative deal signers, unequivocally stated there’s no final deal yet. As Wells put it, 19 days after the deal was announced:
“Furthermore, there can be no assurance as to when or whether a definitive agreement regarding the settlement will be reached and finalized or that it will be on terms consistent with the settlement in principle.”
Still, enough details of the agreement ‘in principle’ have been released, including by Wells in that annual report, for me to write this guide.
The settlement has four basic moving parts: money, lawsuit peace/liability release, mortgage servicing standards, and enforcement. I’m going to look at all four in three different posts. This one focuses on the money in the settlement.
Understanding the Money In the Mortgage Settlement
Like former lovers who send you friend requests on Facebook, old debts can come back to haunt you.
But while you can ignore old flames, you can’t dismiss past debts, even if your lender forgave them. Debts that were canceled or forgiven are considered taxable income – something many taxpayers don’t realize until they receive a 1099-C tax from their lenders.
During the Great Recession, lenders wrote off billions of dollars of credit card debts deemed uncollectible. Now, the tax bills on that debt are coming due. The IRS estimates that creditors will send taxpayers 6.4 million 1099-C tax forms this year, up from 3.9 million in 2010.
The appearance of an unexpected tax bill “creates a financial nightmare for people who have already been through financial hell,” says Gerri Detweiler, personal finance expert for Credit.com.
Fortunately, if unemployment or other financial calamities forced you to default on your debts, there’s a good chance you won’t have to pay the tax bill. You qualify for an exemption from taxes on forgiven debt if:
Oregon lawmakers reached a last-minute deal Monday on protections for homeowners facing foreclosure, passing legislation that will require lenders to meet face to face with borrowers before initiating foreclosure.
The House approved Senate Bill 1552 by a 56-4 vote late Monday as the Legislature approached adjournment. It will require lenders to meet with borrowers in mediation and end the “dual track” practice of foreclosing while negotiating a loan modification.
Deceptive Practices Lives On: Your agent best tell you this is an REO/Foreclosure or he is in big doo doo. They owe you honesty. Sue their asses big time if you are being deceived.
Just because they are told to do this, the agent must disclose to you any facts.
Palm Beach Post-
Looking to buy a home, but not sure you want one that fell into foreclosure?
Good luck finding out before you tour the property.
It’s a little-known fact that Wells Fargo Bank’s Premier Asset Services division, which sells bank-owned homes, instructs agents who sell these houses to list the owner as “Owner of Record,” and not Wells Fargo. Premier Asset Services also sells homes owned by other banks.
The Multiple Listing Service, which is used by real estate agents to list properties, includes a category for bank-owned property. But here again, agents are told by many banks not to disclose the fact that the property is, in fact, owned by a bank.
A number of agents who sell bank-owned properties privately say most banks have the same requirement. They say banks want their homes to be considered equally with non-distressed homes.
BANK OF NEW YORK AS TRUSTEE FOR THE CERTIFICATE HOLDERS CWABS, INC., ASSET-BACKED CERTIFICATES, SERIES 2006-23, Plaintiff-Respondent, v. ALEXANDER T.J. CUPO, Defendant-Appellant, MRS. ALEXANDER T.J. CUPO, WIFE OF ALEXANDER T.J. CUPO AND CITIBANK SOUTH DAKOTA N.A., Defendants.
Kristina G. Murtha argued the cause for respondent.
Before Judges Fuentes, Graves and Koblitz.
NOT FOR PUBLICATION
PER CURIAM.
In this mortgage foreclosure action, defendant Alexander Cupo appeals from the decision of the Chancery Division, General Equity Part, denying his motion to vacate default judgment and dismiss the complaint filed by plaintiff Bank of New York, as Trustees for the Certificate-Holders CWABS, Inc., Asset-Banked Certificates, Series 2006-23. Defendant argues that the trial court erred when it denied his motion because: (1) plaintiff did not have physical possession of the promissory note at the time it filed its complaint for foreclosure; (2) plaintiff did not have standing to prosecute the foreclosure because the original lender, Countrywide Home Loans, assigned the promissory note and mortgage to plaintiff thirty-nine days after the complaint was filed; and (3) both plaintiff and its assignor Countrywide Home Loans failed to satisfy the requirements under N.J.S.A. 2A:50-56.
After reviewing the record before us, we reverse and remand this matter to the General Equity Part for a hearing to determine whether plaintiff has standing to file the complaint. As we made clear in Deutsche Bank Nat’l Trust Co. v. Mitchell, 422 N.J. Super. 214, 224 (App. Div. 2011), a foreclosing mortgagee must demonstrate that it had the legal authority to enforce the promissory note at the time it filed the original complaint for foreclosure. As correctly noted by defendant here, the record shows that the original lender, Countrywide Home Loans, assigned the promissory note and mortgage to plaintiff on May 10, 2007, thirty-nine days after the complaint was filed.
The following facts will inform our analysis of the issues raised by the parties.
I
On December 22, 2006, defendant signed a promissory note to Countrywide Home Loans, Inc., memorializing a $245,000 loan. To secure payment of the note, defendant executed a mortgage to Mortgage Electronic Registration Systems, Inc. (MERS), acting solely as a nominee for Countrywide Home Loans, Inc. The mortgage was recorded on January 11, 2007. Defendant failed to make the first payment on the loan that was due on February 1, 2007. In fact, to date, defendant has not made any payments on the loan. Pursuant to the terms of the loan, defendant defaulted on March 1, 2007. Countrywide mailed defendant a notice of intent to foreclose dated March 5, 2007.
On May 10, 2007, plaintiff Bank of New York filed a complaint in foreclosure, seeking to sell the mortgaged lands to satisfy the amount due. The complaint indicated that “[b]y assignment of mortgage, Mortgage Electronic Registration Systems, Inc., acting solely as a nominee for Countrywide Home Loans, Inc. assigned its mortgage to Bank of New York as Trustee for the Certificateholders CWABS, Inc., Asset-Backed Certificates, Series 2006-03 which assignment has been sent for recording in the office of the clerk of Hudson County.” Plaintiff served the summons and complaint on defendant on June 14, 2007.
The record shows that MERS assigned its mortgage to Bank of New York as Trustee for the Certificateholders CWABS, Inc., Asset-Backed Certificates, Series 2006-23, on June 19, 2007. The assignment was recorded on July 5, 2007. Plaintiff filed a request to enter default against defendant on August 20, 2007. Plaintiff mailed a notice of intent to enter final judgment on August 29, 2007. In this light, the matter was deemed uncontested and the court entered final judgment by default on November 15, 2007.
Despite the entry of final judgment, plaintiff and defendant continued to discuss a possible settlement of the suit. Sheriff sales were postponed a number of times during these negotiations.[1] The parties eventually proceeded to mediation. After two sessions, the parties reached an apparent impasse. Although a third session was scheduled for September 28, 2010,[2] defendant moved to vacate the default judgment and dismiss plaintiff’s complaint on August 26, 2010, arguing that plaintiff lacked standing to prosecute the foreclosure action, and failed to comply with the notice requirements in N.J.S.A. 2A:50-56. Plaintiff argued that defendant had not established excusable neglect nor raised a meritorious defense. The trial court denied defendant’s motion to vacate the default judgment as well as his subsequent motion for reconsideration.
II
We start our analysis by reaffirming certain bedrock principles of appellate review. The decision to vacate a judgment lies within the sound discretion of the trial court, guided by principles of equity. Hous. Auth. of Morristown v. Little, 135 N.J. 274, 283 (1994). Under Rule 4:50-1:
On motion, with briefs, and upon such terms as are just, the court may relieve a party or the party’s legal representative from a final judgment or order for the following reasons: (a) mistake, inadvertence, surprise, or excusable neglect; (b) newly discovered evidence which would probably alter the judgment or order and which by due diligence could not have been discovered in time to move for a new trial under [Rule] 4:49; (c) fraud (whether heretofore denominated intrinsic or extrinsic), misrepresentation, or other misconduct of an adverse party; (d) the judgment or order is void; (e) the judgment or order has been satisfied, released or discharged, or a prior judgment or order upon which it is based has been reversed or otherwise vacated, or it is no longer equitable that the judgment or order should have prospective application; or (f) any other reason justifying relief from the operation of the judgment or order.
Here, defendant’s argument challenges directly the power of the court to grant the relief requested by plaintiff. Defendant argues that the default judgment obtained by plaintiff is utterly void from its inception because plaintiff did not have standing to prosecute the case at the time it filed the foreclosure complaint.
A mortgagee may establish standing by showing “that it is the holder of the note and the mortgage at the time the complaint was filed.” Deutsche Bank, supra, 422 N.J. Super. at 224-25 (internal quotation marks omitted). Plaintiff must have “presented an authenticated assignment” dated prior to its filing of the original complaint. See id. at 225. Here, the only evidence of the assignment is the assignment document dated June 19, 2007, which is dated thirty-nine days after plaintiff filed the complaint. As was the case in Deutsche Bank, plaintiff here does not have standing as an assignee to prosecute this foreclosure action.
Because the record before us does not include a certified copy of the original promissory note, we do not address plaintiff’s potential standing under the provisions of the Uniform Commercial Code (UCC) governing the transfer of negotiable instruments. N.J.S.A. 12A:3-101 to-605. We thus remand this matter to the trial court to conduct a hearing to determine whether, before filing the original complaint, plaintiff was in possession of the note or had another basis to achieve standing to foreclose, pursuant to N.J.S.A. 12A:3-301.
Finally, defendant argues that plaintiff failed to provide notice, pursuant to N.J.S.A. 2A:50-56(c), that defendant could sell his home prior to going into foreclosure. We reject this argument substantially for the reasons expressed by the trial court.
N.J.S.A. 2A:50-56(c) requires, in relevant part:
The written notice shall clearly and conspicuously state in a manner calculated to make the debtor aware of the situation
….
(8) the right, if any, of the debtor to transfer the real estate to another person subject to the security interest and that the transferee may have the right to cure the default as provided in this act, subject to the mortgage documents[.]
[(Emphasis added).]
The plain language of the statute only requires inclusion of the right to transfer the real estate if the mortgagor actually has the right to transfer the real estate subject to the security interest. If the mortgage documents do not provide that right, the mortgagee does not have to include that language in its notice of foreclosure.
Here, defendant’s mortgage states:
If all or any part of the Property or any Interest in the Property is sold or transferred… without Lender’s prior written consent, Lender may require immediate payment in full of all sums secured by this Security Instrument.
[(Emphasis added).]
Thus, although the mortgage permits defendant to transfer the property, a nonconsensual transfer is treated as a default, authorizing plaintiff to accelerate the payment of the outstanding principal.
In this light, the trial judge gave the following explanation for rejecting defendant’s argument:
[T]he statute only requires that language to be in [the notice under N.J.S.A. 2A:50-56(c)] if that right exists, and in this case, as I understand it, the mortgage specifically provides that the defendant does not have the right to have anyone else assume the debt or to transfer his interest in the property without the lender’s consent.
….
There is language in the notice of intent, as I read it…, if you are willing to sell your property, your home, in order to avoid foreclosure, it is possible that the sale of your home can be approved through Countrywide, even if your home is worth less than what is owed on it.
So it tells him he can convey his home, it has to be approved by Countrywide, but to have it sold to anyone or to have someone else assume the debt is precluded by virtue of the mortgage instrument itself.
So… that would actually be misleading if that language were in there, because he doesn’t have that right…. [T]he language that you’re saying should be in the notice of intent is in violation of the mortgage document itself.
We agree with the trial judge’s analysis and ultimate conclusion. N.J.S.A. 2A:50-56(c) does not require the lender to notify the borrower of his or her right to transfer the property; it only requires notice of the right to transfer the property subject to the mortgage. Here, the mortgage document prohibits transfer of the property subject to the mortgage without consent. Under these circumstances, plaintiff was not required to provide defendant with notice of an unequivocal right to transfer the property.
Reversed on the issue of standing and remanded for such further proceedings as may be warranted. We do not retain jurisdiction.
[1] Defendant is an intellectually challenged young man who also suffers from a digestive disorder. His father John Cupo, a realtor, has assumed the responsibility to advocate for his son. The record thus includes a certification by defendant’s father in support of defendant’s application to adjourn a court-ordered sheriff’s sale. According to John Cupo, after extensive negotiations on behalf of his son with representatives of Countrywide, the parties reached a tentative settlement in June 2008, whereby Countrywide agreed to restructure defendant’s outstanding debt “by consolidating the loan balance, late fees and penalties with a[n] 11% interest rate going forward.” John Cupo expressed his frustration that despite “innumerable attempts” to inform the lender of his son’s willingness to accept this settlement, “Countrywide… failed to respond to the acceptance of their proposal….”
[2] The parties met for a third and final mediation session on September 28, 2010. The mediation ended without a settlement.
Nevada Attorney General Catherine Cortez Masto recently spoke with the Sun discussing Nevada’s participation in the national mortgage settlement as well as a separate agreement the state made with Bank of America. See here for a news story about the settlement. Here’s an edited transcript of the conversation.
Bankers, money changers, predatory lenders and financial criminals are jumping for joy after the United States government unveiled a plan that would allow each and every one of the crooks who conspired to steal trillions of dollars from innocent citizens to escape jail time.
Think about it. If your checking account is a penny overdrawn, you get punished but if you lie, cheat, falsify documents and take homes from everybody but the rich, you get bailed out by politicians.
Government talks about the great proposed settlement deal with Ally Financial, Bank of America, Citibank, JP Morgan Chase and Wells Fargo whereby the banks agreed to pay $5 billion in cash to try to remedy complaints about dubious mortgage practices and foreclosure abuses. But even if you settle with Ali Baba and four other crooks, there are still 35 thieves left to continue to rob you blind.
Since the DOJ failed miserably with mountains of evidence of fraud throughout the loans, lets see what the SEC will do.
CBS-
The SEC appears to be on the verge of doing what the Justice Department has yet to attempt — prosecuting the biggest players responsible for the mortgage securities fiasco that trashed the U.S. economy.
The securities watchdog has sent so-called Wells notices to Goldman Sachs (GS), JPMorgan Chase (JPM), and Wells Fargo (WFC), indicating that the agency may recommend enforcement proceedings against the banking firms. The investigation seems to focus on whether the companies misrepresented the quality of securities based on subprime mortgages that they bundled and sold to investors in the years leading up to the 2008 financial crisis.
It’s embarrassing that the most information we’ve yet received about the foreclosure fraud settlement comes from an annual report to stockholders by Wells Fargo. In other words, we had to wait for the banks to tell us what was in the settlement, I guess because the regulatory officials who negotiated it weren’t entirely proud of their work.
The Wells notice (it begins on page 74) isn’t legal language, and it states clearly that “the terms… do not become final until approval of the settlement agreement by the U.S. District Court and execution of a consent order.” But it provides some more detailed information than the broad sketch that has been released. For example, we have the first breakdown that I’ve seen of the credit system for principal reductions.
first lien principal forgiveness for LTV less than or equal to 175%: 100% credit (must constitute at least 30% of the Consumer Relief Program credits);
first lien principal forgiveness for LTV greater than 175%: 50% credit for portion forgiven over 175% LTV;
forgiveness of forbearance amounts on existing loan modifications – 40% credit;
earned forgiveness over no more than a 3 year period: 85% credit for LTV less than or equal to 175%; 45% credit for forgiveness over 175% LTV;
second lien principal forgiveness: 90% credit for loans 90 days or less delinquent; 50% credit for loans greater than 90 but less than 180 days delinquent; 10% credit for loans 180 days more delinquent. Subject to a number of requirements, servicers participating in the settlement will be obligated to implement second lien principal forgiveness on second mortgages it owns when another participating servicer reduces principal on a first mortgage via its proprietary non-HAMP modification programs (must constitute at least 60% of the Consumer Relief Program credits when combined with the first lien principal forgiveness credits);
deficiency balance waivers on first and second lien loans: 10% credit;
short sale deficiency balance waivers on first and second lien loans: 20% to 100% credit depending on whether the servicer, servicer/lien holder or investor incurs the loss;
payment arrearages forgiveness for unemployed borrowers: 100% credit;
transitional funds paid to homeowners in connection with a short sale or deed-in-lieu of foreclosure for payments in excess of $1,500: 45% credit if a non-GSE investor bears the cost or 100% if the servicer bears the cost;
anti-blight – forgiveness of principal associated with properties where foreclosure is not pursued: 50% credit;
anti-blight – cash costs paid by servicer for property demolition – 100% credit; and
anti-blight – donation of real estate owned properties to qualifying recipients such as non-profit organizations: 100% credit.
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