Schneiderman Secures Major Settlement That Allows Sweeping Mortgage Investigations To Proceed
A.G. Secures $136 Million For Struggling N.Y. Homeowners, Plus Loan Modifications, Principal Reductions
After Schneiderman’s Persistence, Narrow Settlement Preserves Broad Legal Claims For Housing Crisis Misconduct That Has Not Yet Been Investigated
Schneiderman: Civil & Criminal Investigations Will Continue As We Seek Accountability For Those Responsible For Crisis And Leverage Greater Relief For Homeowners
NEW YORK – Winning his long, persistent demand that a wide array of sweeping civil and criminal claims not be released without investigation, Attorney General Eric T. Schneiderman announced today a $136 million settlement for New York with the nation’s five largest mortgage servicers over foreclosure abuses, the most per “underwater” borrower of any state in the nation, and the fourth highest dollar amount nationwide as part of the federal-state settlement. In addition to penalties for past abuses, the settlement includes direct relief to victims of wrongful foreclosure conduct, loan modifications including principal reductions for struggling homeowners, and funds that can be used to support foreclosure legal assistance and housing counseling programs. Today’s settlement, which also imposes strong national standards for mortgage servicing, fulfills Attorney General Schneiderman’s demand that he retain the right to bring legal action over misconduct that has not yet been investigated, a right that was absent from earlier settlement proposals.
“Thanks to the advocacy and support of Americans across the country, we have preserved the right to continue investigating the misconduct that led to the bubble and crash of the housing market. 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 Attorney General Schneiderman. “On multiple fronts, we will continue to investigate the mortgage crisis that has impacted communities in every corner of this state, and ensure that justice and accountability prevail.”
Over the past year, Attorney General Schneiderman fought for a fair national settlement, on behalf of New York’s homeowners, for mortgage servicing abuses, making it clear that he would not sign an agreement that would give financial institutions broad legal immunity for conduct that had not been investigated. Until recently, the language in settlement proposals had been too broad to justify reaching an agreement. Today’s settlement is a vast improvement, and it will allow the Office of the Attorney General and other agencies to investigate and bring appropriate civil and criminal actions.
New York’s estimated share of the guaranteed cash payments in the settlement is $136 million, the fourth highest in the nation. New York will be able to distribute these funds to legal aid, homeowner assistance and advocacy organizations to help distressed individuals facing foreclosure or servicer abuse.
Among the critical legal claims Attorney General Schneiderman fought for, and successfully preserved in today’s settlement are:
- All criminal claims.
- All claims based on mortgage securitization misconduct, under securities fraud statutes, including New York’s Martin Act, and other sources of law. This includes securitization claims based on servicing, foreclosure or origination-related facts.
- All claims directly against the private national mortgage electronic registry system known as MERS, as well as claims against financial institutions for the use of MERS in the Attorney General’s recently filed lawsuit over a wide range of deceptive and fraudulent practices in New York.
- All claims for violations of fair lending lawsthat relate to discriminatory practices in loan origination.
- All tax claims, including any claim that the failure to transfer mortgage loans to the securitization trusts or other conduct violated tax rules.
- All claims by counties for lost mortgage recording fees; and
- All claims and defenses held by private and third parties, including those held by individual mortgage loan borrowers.
Mark Ladov, Counsel for the Brennan Center's Democracy Program said, “Homeowners in every corner of state have been hit hard by the mortgage crisis. We must do everything we can to prevent this kind of economic catastrophe from happening again, and to assist the families and communities hit hardest. We applaud the leadership of Attorney General Schneiderman in ensuring that today’s settlement provides much-needed funding for foreclosure prevention services, a great deal for the people of this state. This settlement is a landmark, but much work remains to be done. Fortunately, Attorney General Schneiderman has preserved our state’s right to investigate the mortgage meltdown, and we will work with him to deliver justice for the people of New York.”
Kirsten E. Keefe, Senior Attorney, Empire Justice Center, said, “We applaud Attorney General Schneiderman’s work towards a meaningful agreement that promises to provide desperately needed relief to New York’s homeowners, as well as hold the industry accountable. We truly appreciate the Attorney General’s recognition of the importance and need for direct services for struggling homeowners, and the critical role legal services and housing counselors play in keeping homeowners in their homes. We look forward to working with Attorney General Schneiderman to ensure that servicers do the right thing and provide meaningful loan modifications to stabilize New York’s housing market and economy.”
Sarah Ludwig, Co-Director of the Neighborhood Economic Development Advocacy Project said, “Thousands of New York families and communities are still suffering from the fallout of the foreclosure crisis, and the settlement charts out critical relief. We thank Attorney General Schneiderman for insisting on transparency and accountability in the process of forging a multi-state settlement. We look forward to working with the Attorney General to make sure that the settlement is effectively implemented and enforced in New York, and to ensuring that individual homeowners' rights are vigorously protected.”
Christie Peale, Executive Director of the Center for NYC Neighborhoods, said, "New Yorkers have been fortunate to have strong leadership fighting for a fair resolution to the economic crisis. We applaud Attorney General Schneiderman for his continued commitment to justice and accountability. This settlement, along with the state’s ongoing investigation into the mortgage crisis will bring both immediate and long-term relief to homeowners at risk of losing their homes."
Today’s settlement preserves the legal authority of the Schneiderman-led Residential Mortgage-Backed Securities Working Group announced by President Obama in the State of the Union address. This joint investigation brings together the Department of Justice (DOJ), several state law enforcement officials, and other federal agencies to investigate those responsible for misconduct contributing to the financial crisis through the pooling and sale of residential mortgage-backed securities. It builds upon ongoing state and federal investigations, while also launching new ones.
The new working group includes hundreds of staff, including an initial commitment of 55 Department of Justice attorneys, in addition to analysts, agents and investigators. As it begins its work, 15 federal prosecutors – civil and criminal – and 10 FBI agents and analysts will be initially assigned to the working group. An additional 30 attorneys, investigators and other staff from U.S. Attorneys’ Offices around the country will join the working group’s efforts, in addition to existing state and federal investigations into similar misconduct under those authorities.
Attorney General Schneiderman has made it a top priority of his administration to hold accountable those whose misconduct led to the collapse of the housing market– and to provide significant relief to homeowners. In the State of New York, an average of 1 in 10 mortgages is at risk of foreclosure. The approximate number of individuals living in homes that are either in foreclosure or at risk of foreclosure (based on typical household size for each distressed mortgage) exceeds the populations of Buffalo, Rochester, and Syracuse combined.
The below figures for New York homeowners are estimates of the U.S. Department of Housing and Urban Development. The specific amounts are dependent on eligibility requirements and are not guaranteed.
Payments to victims of wrongful foreclosure:
$13 million estimated
Benefits estimated from refinance program:
$140 million estimated
Homeowners' benefits from loan modifications:
$495 million estimated
Because of the complexity of the mortgage market and this agreement, which will be performed over a three-year period, borrowers will not immediately know if they are eligible for relief. It will take between 30-60 days to appoint a settlement administrator, and banks will be conducting a vigorous search to identify eligible borrowers and this may take several months.
- For loan modifications and refinance options, borrowers may be contacted directly by one of the five participating mortgage servicers.
- For payments to foreclosure victims, a settlement administrator designated by the attorneys general will send claim forms to eligible persons (You may be eligible if you were foreclosed on between January 1, 2008 and Dec. 31, 2011)
- Even if you are not contacted, if your loan is serviced by one of the five settling banks, you are encouraged to contact your servicer to see if you are eligible—keeping in mind that it will take anywhere from six to nine months to be contacted.
- Bank of America: 877-488-7814
- Citi: 866-272-4749
- Chase: 866-372-6901
- GMAC: 800-766-4622
- Wells Fargo: 1-800-288-3212
For more information on today’s agreement, visit:
The matter is being handled by Deputy Solicitor General Steven Wu, Deputy Solicitor General Richard Dearing, Deputy Bureau Chief of Consumer Frauds & Protection Jeffrey K. Powell, Special Deputy Attorney General Maria Filipakis, Bureau Chief for Investor Protection Marc Minor, Senior Advisor and Special Counsel to the Attorney General Scott Wilson, Executive Deputy Attorney General for State Counsel Kent Stauffer, Solicitor General Barbara Underwood, First Deputy Attorney General Harlan Levy, under the supervision of Attorney General Eric T. Schneiderman.