Bank of America, JP Morgan Chase, Citi and Wells Fargo Bank to Assist Consumers in Curing Foreclosure-Related Title Defects
BOSTON – January 20, 2015 – (RealEstateRama) — Four national banks agreed to pay a total of $2.7 million and undertake obligations to facilitate the repair of defective property titles, resolving claims that they unlawfully foreclosed on properties in Massachusetts when they did not hold the mortgages, Attorney General Martha Coakley announced today.
The consent judgment, entered today in Suffolk Superior Court, resolves the AG’s allegations that Bank of America, JP Morgan Chase Bank, Citi, and Wells Fargo Bank violated Massachusetts foreclosure law and the Massachusetts Consumer Protection Act by illegally foreclosing upon Massachusetts residents’ homes when the banks lacked the legal authority to do so.
“Our continued work to address illegal foreclosures in Massachusetts plays an important role in ensuring liquidity in our housing market and providing relief to homeowners who purchased properties with defective titles,” AG Coakley said. “This settlement holds these four national banks accountable for violating state law and cutting corners in the foreclosure process.”
According to the amended complaint, the AG’s Office alleged that the defendants’ unlawful conduct resulted in void foreclosures affecting the marketability and insurability of property titles throughout the Commonwealth. The Supreme Judicial Court ruled in the Ibanez decision that mortgagees seeking to foreclose must strictly comply with Massachusetts foreclosure laws. Under the statutory power of sale and Massachusetts law, a foreclosure is void unless a bank or other foreclosing party is the mortgagee of record or holds the mortgage through a valid assignment before publishing the notice of foreclosure sale.
The amended complaint alleged that the banks ignored this fundamental legal mandate and foreclosed on homeowners when they had no legal authority to conduct the foreclosures. The banks’ failure to obtain a valid assignment of the mortgage prior to foreclosure has adversely impacted titles to numerous properties in the Commonwealth. The AG’s Office is continuing to negotiate a resolution of these claims also alleged against GMAC Mortgage, LLC, one of the named defendants, which filed bankruptcy in May 2012.
Under the terms of the settlement, the banks are obligated to assist a consumer who makes a claim that the title to his or her residence is void from an unlawful foreclosure by conducting a thorough title review, providing curative documents, releasing junior liens held by the banks, and, in cases where consumers do not have title insurance, paying reasonable costs associated with the title cure. In addition, the banks will pay $2.7 million, $700,000 of which will be allocated to the Attorney General’s Local Consumer Aid Fund to provide consumer assistance. The remaining $2 million of the settlement will be paid to the Commonwealth’s General Fund.
The complaint initially contained allegations against the banks relating to widespread mortgage servicing abuses and allegations against Mortgage Electronic Registration System, Inc. (“MERS”) and the banks for violation of Massachusetts law relating to registered land. The allegations relating to registered land were dismissed in November 2012, while the servicing allegations against the banks were resolved in the National Mortgage Settlement, a landmark agreement announced in February 2012. So far, the settlement has provided more than $63 billion in relief to distressed homeowners nationwide, and created significant new servicing standards which the banks must follow. The settlement brought more than $300 million in relief to Massachusetts borrowers, including a direct payment of more than $44.5 million to the Commonwealth, used in part to establish the AG’s HomeCorps program and offer grants aimed at helping to mitigate the impact of the foreclosure crisis.
In February 2014, Ocwen, the nation’s fourth largest mortgage servicer, entered into a $2.1 billion national settlement with the federal government, and 49 states, including Massachusetts, resulting in an estimated $80 million in principal reduction and cash payments to Massachusetts homeowners over claims of loan servicing misconduct and so-called “robo-signing.” Massachusetts homeowners also received approximately $1.5 million in cash payments from that multistate settlement. In addition, in June 2014, Massachusetts filed a separate assurance of discontinuance with Ocwen, paying Massachusetts $3.7 million to resolve claims that it failed to provide certain notices to homeowners and unlawfully foreclosed on certain properties in violation of state law.
More information about AG Coakley’s work during the lending crisis can be found on the AG’s website.
This matter was handled by Assistant Attorneys General Justin J. Lowe, Lisa R. Dyen and Division Chief Stephanie Kahn, with assistance from Assistant Attorneys General Amber Villa and Sara Cable, of Attorney General Martha Coakley’s Consumer Protection Division