LITTLE ROCK – February 13, 2012 – (RealEstateRama) — Attorney General Dustin McDaniel announced today that Arkansas has joined other states and the federal government in a landmark multibillion dollar settlement with five of the nation’s largest banks over allegations of fraud and abuse within the mortgage servicing industry.
The agreement provides direct financial relief to Arkansas consumers at risk of losing their homes to foreclosure and to those who currently owe more than their property is worth. It also requires the banks to implement strict new mortgage servicing standards to prevent future foreclosure fraud. The five federally regulated lenders account for about 60 percent of the mortgage servicing market nationwide.
McDaniel joined federal officials and other state attorneys general today at the Department of Justice in Washington for a news conference to formally announce the 50-state agreement.
“This settlement will provide tangible benefits to struggling Arkansas homeowners in the form of principal write-downs and refinancing opportunities,” McDaniel said. “This is an important means for holding the banks accountable for their bad behavior during the mortgage crisis. We will continue to monitor the mortgage servicing industry and take further action if necessary.”
In 2011, McDaniel strongly supported legislation to require mortgage servicers in Arkansas to provide homeowners at risk of foreclosure with important documentation related to the foreclosures. The mortgage servicers are also required to provide information related to loan modifications. The types of homeowner protections enacted here last year are included in the settlement announced today.
“We worked a year ago to address the needs of homeowners who were contacting our Consumer Protection Division with issues related to mortgage servicing,” McDaniel said. “The multistate agreement incorporates what we have already done and sets the bar even higher for mortgage servicers in Arkansas.”
McDaniel selected Deputy Attorney General Jim DePriest and Senior Assistant Attorney General Sarah Tacker to lead the State’s ongoing investigation into mortgage and foreclosure issues. DePriest heads the Attorney General’s Public Protection Department and Tacker is chief of that department’s Consumer Protection Division.
The multistate settlement does not prevent states from pursuing investigations into other aspects of the mortgage crisis. It does not grant any immunity from criminal offenses and does not prevent homeowners or investors from pursuing individual, institutional or class action civil cases against the five mortgage servicers.
The settlement is a result of a 16-month investigation by multiple federal agencies and state attorneys general into illegal mortgage servicing practices such as “robo-signing,” or approving foreclosure documents without reviewing them.
As part of the agreement, an independent, outside monitor will review the banks’ compliance with the settlement and report to state attorneys general.
“This bipartisan effort is the largest consumer protection action by the nation’s attorneys general since the tobacco litigation in the mid-1990s,” McDaniel said. “We are proud of this effort on behalf of American consumers.”
Arkansas will receive an estimated $39.4 million in the settlement. Of that, the lenders will dedicate approximately $11.8 million toward first- and second-lien principal reduction and other forms of loan modification relief in Arkansas. Another $5.7 million will be set aside for refinancing of loans to underwater borrowers. Arkansans who lost their homes to foreclosure from Jan. 1, 2008, to Dec. 31, 2011, and suffered servicing abuse would be entitled to a share of approximately $8.5 million.
A payment to the State of $13.4 million will be directed to government agencies that offer housing assistance and legal help to low- and middle-income Arkansans.
McDaniel said he would direct $9 million of those funds to the Arkansas Development Finance Authority in support of ADFA’s programs that provide down payment assistance to homebuyers, foreclosure counseling to existing homeowners and financial literacy programs, as well as other ADFA programs related to housing and economic development in the State.
“At ADFA, we are dedicated to improving our state’s economy by ensuring access to safe, quality and affordable housing,” said Mac Dodson, ADFA president. “We are grateful for the opportunity to take funds from a settlement related to misconduct in the mortgage industry and put that money to good use in Arkansas. Our agency will make sure this money is allocated toward programs that directly benefit Arkansans who need help the most.”
The Arkansas Access to Justice Commission will receive $2 million to provide equal access to justice for Arkansans affected by the mortgage crisis. The University of Arkansas School of Law in Fayetteville and the University of Arkansas at Little Rock Bowen School of Law will each receive $500,000 to support legal aid clinics at both law schools.
Approximately $1.4 million will be directed to the state treasury for costs and fees associated with the settlement agreement
For more information about the settlement agreement, Arkansans may call the Consumer Protection Hotline of the Attorney General’s Office at (501) 682-2341 or (800) 482-8982. Consumers may also visit NationalMortgageSettlement.com or www.ArkansasAG.gov.