Indiana Attorney General Greg Zoeller announced Thursday that Indiana would be one of 49 states benefitting from the federal government's settlement with five major mortgage lending banks and servicing institutions.
The state’s share of the settlement with Ally, Bank of America, Citi, JPMorgan Chase and Wells Fargo will be about $145 million. The settlement agreement stems from the banks' foreclosure abuses and fraud as well as unacceptable nationwide mortgage servicing practices.
Zoeller said the settlement will result in reduced loan balances to benefit homeowners who are behind on their payments and who are "underwater" or owe more than their homes are worth.
Indiana's borrowers will receive an estimated $30 million in benefits from loan term modifications and other direct relief. As many as 13,000 Indiana borrowers who lost their home to foreclosure from Jan. 1, 2008, through Dec. 31, 2011, and suffered servicing abuse could qualify for about $26.3 million in cash payments. The AG’s office will receive a direct payment of about $45 million to help fund consumer protection, state foreclosure prevention efforts and related programs. The Department of Financial Institutions will receive an estimated $1 million.
The value of refinanced loans to Indiana's underwater borrowers would be an estimated $43 million.
"This national settlement offers immediate help to many people in Indiana and also allows an opportunity for the national housing market to recover from the crisis of 2008, hopefully sooner rather than later," Zoeller said.
The final agreement, through a consent judgment, will be filed in United States District Court in Washington, D.C., and will have the authority of a court order.
Because of the complexity of the mortgage market and this agreement, which will span a three-year period, in some cases participating mortgage servicers will contact borrowers directly regarding loan modification options. However, borrowers are advised to contact their mortgage servicers to obtain more information about specific loan modification programs and whether they qualify under terms of this settlement.