National Mortgage Settlement: Rules to Help Protect Homeowners in Foreclosure

The National Mortgage Settlement with five of the largest mortgage servicers set new standards for the servicing of loans.

The National Mortgage Settlement with five of the largest mortgage servicers—Ally/GMAC, Bank of America, Citi, JPMorgan Chase, and Wells Fargo—set new standards for the servicing of loans, particularly loans in foreclosure. These new standards were designed to provide homeowners (both those in good standing and those in foreclosure) with more information, limit servicing abuses related to fees, prohibit dual-tracking, and more.

The servicing standards under the settlement were in effect until the later part of 2015, though they are now largely duplicated by federal law.

Read on to learn the history of the National Mortgage Settlement.

The National Mortgage Settlement

In February 2012, 49 state attorneys general and the federal government reached a historic settlement with five of the nation’s largest banks. As part of the settlement, the banks were required to (among other things):

  • provide cash payments to former homeowners who went through foreclosure in 2008-2011
  • make cash payouts to the states to address foreclosure related issues
  • provide assistance such as modifications and refinancing for homeowners who were underwater, and
  • comply with new servicing standards.

Servicers Subject to the Settlement

Again, the settlement applied to the following five major loan servicers: Ally/GMAC, Bank of America, Citi, JPMorgan Chase, and Wells Fargo.

Loans serviced by one of the servicers above, but owned by Fannie Mae or Freddie Mac, were not covered by the consumer relief part of the settlement. But servicers had to service Fannie and Freddie loans in compliance with the settlement’s servicing guidelines. (To find out if either Fannie Mae or Freddie Mac owns your loan, go to www.knowyouroptions.com/loanlookup and www.freddiemac.com/mymortgage.)

Loan Servicing Reforms

The National Mortgage Settlement's servicing guidelines primarily addressed the most egregious servicing abuses that occurred in the past, like robosigning and faulty loan ownership documentation. These servicing standards were in effect until the latter part of 2015.

Now, most of the expired servicing standards are now covered by federal law. (Learn whether your loan servicer has to comply with federal mortgage servicing laws.)

Getting Help

If you think your servicer is treating you unfairly or violating the law in a foreclosure, consider talking to an attorney to discuss your options. If you want to learn about different ways to avoid a foreclosure or you need help completing a loss mitigation application, consider contacting a HUD-approved housing counselor.

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