On April 4, 2012, a U.S. District Court signed off on a groundbreaking $25 billion settlement between the largest mortgage servicers, the federal government and 49 state attorneys general. The settlement was initially announced on February 9, 2012.
The recently disclosed agreements by Ally Financial Inc., Bank of America Corp., Citigroup Inc., JPMorgan Chase Bank NA and Wells Fargo Bank NA, will require the banks to adhere to federally monitored mortgage servicing standards. The banks will also be subject to potential penalties of $1 million for violations of the consent decrees or $5 million for repeat violations. The banks will also be required to enhance their supervision of third-party servicers, such as law firms, which often operate the banks' mortgage-servicing businesses. The agreements provide for at least $20 billion in assistance to homeowners that were subject to allegedly improper mortgage practices. The deal will also entail a cash payment of $5 billion to the federal government and 49 state attorneys general, of which approximately $1.5 billion will go to a separate fund to assist individuals who were foreclosed on between 2008 and 2011.
The banks also reached separate settlement agreements with certain U.S. states in mid-March, including a $25 million settlement with New York's attorney general, a $2.5 million settlement with Delaware's attorney general, as well as settlements by certain banks with the attorney generals of California, Florida and Massachusetts. ("Judge Finalizes Banks' Landmark $25B Mortgage Settlement," Law360.com, April 5, 2012).
