Kentucky joins mortgage foreclosure settlement

Kentucky expected to receive $58 million in national mortgage foreclosure settlement

Associated Press

FRANKFORT, Ky. (AP) -- Kentucky will receive $58.8 million as part of a $25 billion national mortgage foreclosure settlement with the five of the country's largest banks.

On Thursday, Attorney General Jack Conway said he had joined attorneys general from 48 other states in the settlement, against the five banks: Citigroup, Bank of America, JP Morgan Chase, Wells Fargo and Ally Financial.

The agreement provides relief to thousands of homeowners who were foreclosed upon after the housing bubble burst, principal write-downs and refinancing to homeowners whose mortgages exceed the value of their homes and payments to states for consumer protection programs.

The agreement preserves the rights of states to pursue criminal and civil actions.

It also does not prevent homeowners from pursuing their own lawsuits.

"I was one of the attorneys general who refused to sign the settlement unless those provisions were included," Conway said. "I think our efforts made a difference."

Negotiations, including the federal government, have been under way since 2010. Conway's office entered into the agreement early Tuesday morning. Oklahoma is the only state that did not participate.

The deal affects several thousand homeowners in Kentucky, including 5,400 who were foreclosed upon between Jan. 1, 2008 and Dec. 31, 2011.

It is the largest action taken by states attorneys general against an industry since the 1998 tobacco settlement.

The five banks have about 60 percent of the home mortgage market excluding Fannie Mae and Freddie Mac, which together have about 60 percent of all home mortgages nationally, Conway said.

About one in five homes in the U.S., or 11 million, are "under water," meaning the owners owe more than the homes are currently worth — including 25,000 to 26,000 homes in Kentucky, he said.

The $58.8 million Kentucky will receive in the settlement includes:

— $12 billion in direct relief to homeowners, including loan-term modifications and principal write-downs.

— $10.8 billion in direct payments from the banks to consumers who were foreclosed upon using practices such as "robo-signing," in which banks did not properly prepare and review paperwork and applied automatic or electronic signatures to court documents.

— $15.9 in refinancing for borrowers who are current on their mortgage payments but hold mortgages that exceed the value of their homes.

— $20 million in direct payment to the state for consumer protection programs and further investigation of abuses.

"We're going to use a significant portion of this money to make sure we continue to fund our efforts to investigate these abuses on behalf of homeowners," he said.

That will include an investigation of the Mortgage Electronic Registration System (MERS).

Conway said that on Thursday he subpoenaed MERS, the which he believes has "circumvented Kentucky law by failing to properly record mortgage assignments and pay filing fees with county clerks throughout the Commonwealth of Kentucky."

"There's a good chance that nine additional banks that make up a good portion of the market may sign on to a similar agreement with the AGs and the federal government sometime soon, and those banks have quite a significant impact in the commonwealth of Kentucky," he mentioned.

The Attorney General's Office has set up a Web page with information and answers to frequently asked questions by homeowners who may qualify for relief: http://www.ag.ky.gov/mortgagesettlement .

There is also a national website about the settlement: www.nationalmortgagesettlement.com .

Homeowners with questions may also call the the attorney general's consumer protection hotline at 1-888-432-9257.

Conway said banks have an obligation to contact the homeowners, but the banks have also made available numbers for consumers to call them with questions. Those numbers are listed on the national website.

"This matter is not closed," Conway said. "It's an important first step, but we're going to continue working on the issue."

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