Attorney General Beau Biden announced June 5 that more than 2,500 Delawareans are benefitting financially - either through direct payments, mortgage modifications or other assistance - from last year’s historic settlement with the nation’s five largest banks. On the state level, he also announced that his office’s Mortgage Mediation Program has been extended for four years, to January 2018.
“We must keep working to help Delawareans who are still feeling the financial impact of the housing crisis,” Biden said. “Our mediation program and the benefits we secured for our state from mortgage banks through the national settlement are helping homeowners avoid foreclosure, and that helps families, our communities and Delaware’s economy.”
In January of last year, as part of a robust response to the housing crisis, Biden’s office launched the Delaware Mortgage Mediation Program that requires lenders and borrowers to have a meaningful conversation about alternatives to foreclosure before a foreclosure proceeding can move forward. The program was slated to expire in Jan. 2014, but Gov. Jack Markell signed legislation last week extending the initiative to 2018.
As of the end of the first quarter of this year (through March 31) the Mediation Program has processed 884 foreclosure actions. Approximately 50 percent of the eligible homeowners actively participate in the mandatory mediation conferences scheduled for them. Of those active participants, 61 percent are able to remain engaged in negotiations with their lender through mediation or reach a non-foreclosure resolution.
In February of last year, Biden, 48 other attorneys general and the federal government reached a $25 billion settlement with five of the nation’s largest mortgage banks including Ally (formerly known as GMAC), Bank of America, Citi, JPMorgan Chase and Wells Fargo. The settlement resolved allegations of widespread mortgage servicing misconduct, including “robo-signing” of foreclosure documents by those banks. As part of that settlement, over the next two weeks, approximately 1,500 Delawareans who lost their homes to foreclosure will begin receiving checks in the mail.
Eligible Delawareans are those individuals who had a mortgage serviced by one of the five participating banks, lost their home between 2008 and 2011, and submitted a valid claim form. Most checks will be for $1,480, but some could be split if a couple was married when their home was foreclosed on but since divorced. The checks, paid by the five participating banks, are to compensate former homeowners for mortgage servicing abuses the banks may have committed.
In addition to compensating borrowers for the servicing abuse that happened in the past, the settlement’s tough new mortgage servicing standards seek to prevent future instances of abusive servicer conduct.
Since late last year, an additional 1,202 Delaware homeowners have benefitted from terms secured through last year’s settlement by Biden and other attorneys general that require banks to reduce principal on mortgage loans, extinguish second lien mortgage loans, waive deficiencies in short sales, and provide refinancing to so-called “underwater” homeowners who, despite being current on their mortgages, are unable to refinance because they owe more than their homes are worth.
The principal reductions, refinancing and other benefits now total $67 million for those 1,202 Delaware homeowners. Plus, another 415 homeowners are in the pipeline to receive approximately $30 million more in benefits. These homeowners have either already been offered mortgage modifications and are deciding whether to accept the terms, or have accepted the terms and are in a trial period.
In addition to the financial components of the settlement, the banks were also required to implement hundreds of improvements to their operations, especially in customer service. Biden’s office insisted that protections for military members be included in those requirements. Additional detail about the mortgage relief provided by the five settling banks under the terms of the national mortgage settlement and Delaware-specific relief for each of the banks is posted on the independent monitor’s website at www.mortgageoversight.com/map.