The proposed mortgage settlement between 49 state attorneys general and the nation’s largest loan servicers could net $8.4 billion in relief to Florida homeowners, Florida Attorney General Pam Bondi announced on Thursday.
The joint federal-state investigation resulted in a proposed $25 billion settlement over the mortgage practices of large banks and loan servicers, including robo-signing, where lenders were alleged to have filed foreclosure lawsuits without verifying the accuracy of the documentation. This led to thousands of foreclosure lawsuits in Florida getting held up and mired in confusion.
GMAC (NYSE: ALLY) were the loan servicers involved in the settlement. It applies to their handling of loans in mortgage-backed securities (MBS).
The settlement releases civil claims, but it doesn’t release any parties from criminal claims, Bondi announced. The agreement doesn’t prevent individuals or class action groups from suing lenders. A federal judge in Washington, D.C. must approve the deal.
However, the agreement excludes mortgages owned by Fannie Mae
The $8.4 billion settlement payments in Florida breaks down this way:
- Florida borrowers could get $7.6 billion in relief from lenders in the form of loan modifications, including principal reductions. Nationally, this part of the settlement accounted for $17 billion.
- Lenders promised to save Florida borrowers with underwater mortgages $309 million by refinancing their loans. The national component of this program is $3 billion.
- The lenders would pay $170 million to Florida borrowers who lost their homes to foreclosure from Jan. 1 2008 through Dec. 31, 2011 and suffered “servicing abuse.” The national portion of this would be $1.5 billion to about 750,000 borrowers.
- The lenders will pay the state $350 million. The money is slated for consumer protection efforts.
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