One day after telling state lawmakers that he was not ready to sign onto a proposed settlement between the nation's attorneys general and five banks over alleged foreclosure abuses, Attorney General Beau Biden announced Thursday that Delaware will indeed join the pact.
In a statement issued by his office, Biden said the settlement is not perfect, but that it has been significantly improved since first proposed and will result in real relief for Delaware homeowners. He also noted that the settlement will not prevent his office from continuing its investigations into mortgage-related practices, and that it provides new homeowner protections to members of the armed forces serving overseas.
The banks involved in the settlement include Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial.
Delaware will see a benefit of more than $45 million under the settlement, including at least $32 million that banks will receive as credits for reducing loan principals, providing refinancing to homeowners who are current on their mortgages but unable to refinance because they owe more than their homes are worth, and offering other concessions aimed at helping borrowers stay in their homes.
Delaware also is slated to get about $2 million for restitution to people who lost their homes to foreclosure. The settlement calls for those individuals to receive payments of about $2,000 each. That would mean checks for roughly 1,000 Delawareans, who would not be prevented from pursuing their own mortgage-related lawsuits.
Biden's office would receive $8.3 million as its share of the settlement, and another $2.5 million in exchange for a limited release of penalties against the banks related to their conduct involving MERS, a nationwide electronic mortgage registry.
Biden's office filed a lawsuit last year alleging that Virginia-based Mortgage Electronic Registration Systems Inc. has sown confusion among consumers, investors and other stakeholders in the mortgage finance system, damaged the integrity of Delaware's land records system and led to unlawful foreclosure practices.
MERS, which was set up by the banking industry to rapidly package and sell mortgages as securities without recording each transaction in county recorder offices, says the allegations have no merit and has asked a judge to dismiss the lawsuit.
Biden told members of the Delaware legislature's budget-writing committee on Wednesday that he was not yet ready to sign on to the nationwide foreclosure settlement, but a last-minute side agreement hammered out by his office with the banks cleared the remaining obstacles.
Under that agreement, the banks conceded that Biden's office, with certain limitations, could seek to include them as defendants in the MERS lawsuit or file a separate action against them in Delaware's Court of Chancery for their conduct related to MERS. Biden's office agreed to accept $2.5 million from the banks now in return for not seeking monetary penalties against them in any MERS-related litigation.
The state still could seek other relief from the banks over alleged problems with MERS, including changes to the electronic registration system and recovery of actual damages suffered by homeowners who were the victims of improper foreclosures. Biden's office also would not be precluded from seeking monetary penalties against MERS itself.
Biden said the settlement would not affect Delaware's intervention in a proposed $8.5 billion settlement between the Bank of America and the Bank of New York Mellon regarding investor losses from mortgage-backed securities, or an ongoing joint investigation with the New York attorney general's office into mortgage securitization practices.
Biden said he intervened in the proposed settlement to protect the interests of Delaware investors who may have been harmed, and to ensure that borrowers' interests were better represented by requiring Bank of America to repurchase bad mortgages.
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