From the Attorney General ...
Michigan will join at least 40 other states in a multi-billion dollar nationwide settlement with five of the nation’s largest banks/mortgage servicers in response to allegations of faulty foreclosure processes and poor servicing of mortgages that harmed Michigan homeowners. Schuette said that Michigan residents will receive approximately a half-billion dollars, including a $101 million fund provided directly to the State of Michigan. The settlement is anticipated to be the second-largest financial recovery ever achieved for affected citizens by attorneys general, with the 1998 Master Tobacco Settlement being the largest.
“States across America have worked hard to present a united front in the fight to help stabilize the housing market in the aftermath of harmful mortgage lending and foreclosure
practices,” said Michigan Attorney General Schuette. “As a result, Michigan residents who were hit hard by this crisis will now receive assistance.”
Schuette's criminal investigation of LPS/Doc-X remains ongoing, and the settlement does not preclude him from pursuing additional criminal probes of the mortgage lending/servicing industry. “Importantly, we retain the right to file criminal charges when the evidence calls for them. We will continue to follow any evidence of criminal activities, wherever it leads us.”
Attorney General Tom Miller (D-Iowa), Chairman of the Multi-State Attorney General Workgroup that led the negotiations, added, “This monitored settlement holds the banks accountable,
it provides badly needed relief to borrowers, and it helps fix a badly broken mortgage servicing system through tough but fair new servicing standards.”
Of the total half-billion anticipated to benefit Michigan citizens, Schuette expects the funds will be distributed to Michigan citizens affected by foreclosure in the following areas:
1) Borrower Payments - A national settlement administrator will distribute cash payments to borrowers in Michigan who went through foreclosure from 2008-2011. More information will be forthcoming detailing on who will be eligible for benefits and how to apply. Receipt of payments will not preclude borrowers from taking future legal action, if warranted.
2) Refinance Program - Servicers will fund a refinancing program for borrowers who are current with their mortgage payments but owe more than their homes are worth due to declining property values. These so-called "underwater loans" will allow affected homeowners to refinance and achieve relief through lower interest rates.
3) Federal Menu Benefits - A spend-down fund will require banks to provide principal balance reductions, short sales, deeds in lieu of foreclosure and other relief for homeowners currently struggling with foreclosure
Approximately $101 million of the half-billion in funds anticipated to benefit Michigan citizens will come directly to the State of Michigan via the legislature. With these funds, Schuette called for the creation of the Michigan Homeowner Protection Fund to direct the monies towards six initiatives to ensure Michigan families, children and veterans affected by the foreclosure crisis receive maximum benefit from the funds.
“We can't go back in time to undo the impact of the foreclosure crisis in Michigan, but these funds will go a long way toward repairing the damage for Michigan families,” said Schuette.
The six initiatives are:
1) Foreclosure Counseling for Homeowners;
2) Foreclosure Rescue Scam Restitution;
3) Payments to Borrowers Who Suffered Foreclosure;
4) Veteran's Assistance;
5) Aid for Children Made Homeless by Foreclosure; and
6) Michigan Attorney General Home Protection Unit, to allow the AG to ramp up investigation and prosecution of foreclosure-related crimes., with a portion toward consumer protection education and assistance.
An important part of the settlement includes reforms to the mortgage loan servicing industry.