The Michigan Attorney General is working hard to ensure Michigan citizens have all the information about this important settlement. Please check back to this website, as updates will be added once more information becomes available.
The current version of the Frequently Asked Questions was last updated on January 2, 2014.
The Michigan Attorney General and other participating state Attorneys General entered into this settlement in 2012 with the five leading bank mortgage servicers to address allegations of faulty foreclosure processes and poor servicing of mortgages that harmed Michigan homeowners. The settlement requires the bank mortgage servicers to provide the participating states, including Michigan, up to $25 billion dollars in monetary sanctions and relief. Michigan residents are expected to receive approximately $780,000 million in benefits, including a $97 million payment directly to the State of Michigan. In addition to the monetary relief, the settlement requires comprehensive reforms of mortgage loan servicing. These reforms will improve customer service for borrowers on a permanent basis. The settlement is the second-largest financial recovery ever received for affected citizens by Attorneys General, with the 1998 Master Tobacco Settlement being the largest.
This settlement applies to the following five banks/mortgage servicers:
There are 4 different categories of monetary relief:
In total, the portion of the settlement payment flowing to Michigan is estimated at $803,209,984.00. The chart below shows these figures also.
Federal Menu Benefits*
* Note: Numbers marked with asterisks are estimates.
Michigan Attorney General Bill Schuette recommended that the Legislature create the Homeowner Protection Fund to ensure Michigan families, children, and veterans affected by the foreclosure crisis receive the maximum benefit from the settlement funds. Pursuant to that recommendation, the Michigan Legislature created the fund and directed the monies to the following nine initiatives:
The time frame is as follows:
Claim forms were sent to consumers who were eligible for borrower payments under this settlement and responses were due January 18, 2013. Payments of approximately $1,480 went out beginning June 10, 2013.
Payments were made based on eligible loans. In total, 72,263 valid claims were filed in relation to properties located in Michigan. The total dollar amount for these claims was $107,253,467. On a nationwide basis, there were 962,278 valid claims filed. The total number of checks being mailed is slightly higher, due to the fact that some loans had more than one borrower, who subsequently divorced, separated, etc.
In the midst of the claims administration process, it was discovered that 2 mortgage servicers mistakenly omitted certain borrowers who did in fact meet the eligibility criteria. Rather than delay payment for everyone else, the payment process has gone forward for all other eligible claimants. Claim forms went out to eligible borrowers who were not included in the previous notice of eligibility and these claims are being processed.
Anyone who submitted a claim for to the claims administrator, Rust Consulting, will receive a response from Rust. You can also contact Rust Consulting directly at 1-866-430-8358. Additionally, for a small number of claims, the claimant's social security number did not match the IRS database, and these claims will need additional processing.
A mortgage servicer administers mortgage loans, including collecting and recording payments from borrowers. A servicer also handles loan defaults and foreclosures, and may offer special programs to assist borrowers who have fallen behind on their loan payments.
The company that you make your monthly mortgage payment to is your mortgage servicer. Your mortgage servicer may or may not be a lending institution and may or may not own your loan.
For loan modifications and refinance options, many borrowers were contacted directly by one of the five participating mortgage servicers. 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 a loan modification or refinance is possible. The five servicers have set up toll-free hotlines specifically to take questions about this settlement:
The Michigan Attorney General also encourages citizens to contact a free, state-certified housing counselor through the Michigan State Housing Development Authority to seek additional assistance. Visit the Michigan State Housing Development Authority's website or call their toll-free hotline, 866-946-7432.
A settlement monitor has been appointed who has been gathering information and testing whether the banks are living up to their promises. The settlement includes specific criteria to measure compliance and remedial steps for non-compliance. Information about the monitor & the ongoing compliance review is available on the monitor's website.
Some borrowers who were current in their payments, but were "underwater" on their mortgages, qualified for refinancing relief under the settlement. "Underwater" means a borrower owes more on the mortgage than the home is worth.
Beyond that, the mortgage servicers involved in this settlement broke the law, the conduct harmed borrowers, and this settlement addresses that conduct. If the mortgage servicers followed the law, many foreclosures likely could have been prevented. Foreclosure has a profound impact beyond the borrower and the creditor. A foreclosure affects homeowners, families, neighborhoods, communities, the housing market, and our overall economy.
Michigan citizens have witnessed the negative impacts of the foreclosure crisis firsthand, with declining home values, abandoned properties, and displaced citizens. When a house is subject to foreclosure, it creates a ripple effect that lowers the value of nearby homes and other properties. In 2009, the Center for Responsible Lending projected that homeowners living near foreclosed properties, on average, would lose $7,200 in property value, and projected a four-year increase in losses to $20,300 per household.
Foreclosures contribute to unstable family and social environments. They increase stress on homeowners, their families, and their neighbors. These deteriorating, neglected properties and neighboring property value losses create neighborhood blight, cut a community's tax base, and can contribute to crime. Displaced homeowners put other stresses on communities, including the need for shelter and social services. Foreclosures affect everyone and affect our economy even those who play by the rules and pay their monthly mortgage on time.
The Servicemembers Civil Relief Act (SCRA) provides protections for active duty military servicemembers, including postponing or suspending certain civil obligations, such as mortgage payments and foreclosure. This settlement provides enhanced safeguards for military personnel that go beyond SCRA protections, including extending the window of protections for qualified servicemembers, and not requiring servicemembers to be delinquent to qualify for a short sale, loan modification, or other loss mitigation relief if the servicemember suffers financial hardship and is otherwise eligible for such loss mitigation.
The states and federal agencies established that the servicers have done wrong through improper lending practices, improper foreclosures, and additional practices that harmed consumers, and in response the banks have agreed to a settlement that helps many homeowners who have been hurt by misconduct in the marketplace.
Some banks have acknowledged that principal reduction can be an effective tool in stabilizing the housing market and have already forgiven portions of some loans. The idea is to keep people in their homes. The banks lose, on average, about $60,000 on each foreclosure. It is a win-win proposition for the banks to give up some principal - instead of paying $60,000 for each foreclosure - and allow people to remain in their homes. As a matter of pure economics, principal reduction is often better for the bank than the massive losses associated with foreclosure.
The huge number of foreclosures impacts all of us: our nest eggs erode, we may no longer borrow against our homes, and we can't sell them when we need to do so. Principal reduction is one of the tools we've negotiated to help keep more people in their homes and help stabilize the housing market - which helps all of us. It's true that principal forgiveness at this level is extraordinary. But so is the mortgage crisis, which affects families, our neighborhoods, and our economy. Big problems require big solutions.
The release of claims, found in the settlement, relinquishes particular state and federal claims related to issues addressed by the settlement. The release is narrow and limited to mortgage servicing and origination claims. States that signed this settlement may still pursue other claims against the banks, such as securities and securitization claims. States could also sue financial institutions that are not part of the settlement.
States that opted not to sign the agreement are free to pursue their own legal actions. However, those states gave up all the funds designated specifically for their state and its citizens who were foreclosure victims. Homeowners of those states also only qualify for a significantly reduced amount of loan modifications and other benefits being distributed as part of the settlement's national programs.
The agreement does not affect any individual's rights. A consumer may still bring an individual action through private litigation, be a part of a class action, or seek further review/relief.
No. This is a civil, not a criminal, settlement, and this settlement does not prevent state or federal criminal prosecutions.
In November 2012, Attorney General Schuette charged Lorraine Brown, former president of mortgage document processor DocX, with racketeering for authorizing the fraudulent signing of mortgage documents filed in Michigan. In February 2013, Brown pled guilty to that racketeering charge; a 20 year felony. Brown was sentenced in May, 2013 to 40 months to 20 years in prison.
In addition to this criminal charge against Brown, in January 2013, Schuette reached a $2.5 million civil settlement with Lender Processing Services, Inc., the parent company of the now defunct DocX. In addition, affected consumers will have their documents corrected by LPS if necessary.
The Attorney General reserves the right to file criminal charges against anyone involved in the foreclosure crisis who broke the law. Current or former employees of companies connected to the mortgage industry with knowledge or suspicion of criminal conduct in Michigan are encouraged to contact the Attorney General's Corporate Oversight Division at 517-335-7632.
The banks have agreed to major reforms in how they service mortgage loans. These new servicing standards require lenders and servicers to adhere to a long list of rights for those facing foreclosure. For example, borrowers will have the right to see all of their loan documents to make sure any potential foreclosure is legal and will be given every opportunity to first modify their loan before facing foreclosure. Additionally, borrowers will have the right to deal with a reliable, single point of contact from whom to obtain information throughout the process. Lenders and servicers will be required to have an appropriate number of well-trained staff to promptly respond to distressed borrowers. The national settlement monitor and the Attorney General will be aggressive in ensuring mortgage servicers provide homeowners these rights.
Continue to check Attorney General's website for updates as they become available.
The Settlement monitor has also issued a number of reports, which are available on their website.
Scammers are already at work trying to capitalize on the national mortgage settlement to access your personal information or worse, your money. There have already been reports of scammers in Alabama calling borrowers claiming to be one of the major banks involved in this settlement and offering a cash payment to consumers if they simply provide the routing number to access their bank account. If you receive an unsolicited call from someone claiming to represent one of the mortgage servicers, you can identify a scam in several ways:
For more information about protecting yourself from settlement scams, visit Attorney General's website.