At Last, Some Money for Mortgage Relief

HONOLULU (CN) - The five largest mortgage loan servicers in the country must pay $6.8 billion for mortgage-lending abuses, and Hawaii's attorney general has announced his plans to disburse millions of dollars to agencies that will help distressed homeowners.

Attorney General David Louie this week posted an online application and instructions for the "Foreclosure Assistance Program." Hawaii's $7.9 million program is part of a 50-state settlement with Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial/GMAC.

U.S. District Judge Rosemary M. Collyer, in the District of Columbia, awarded consent judgments on April 4 to 50 attorneys general, as restitution and penalties for violating state consumer protection laws.

Penalties and restitution included $1.1 billion as a "Direct Payment Settlement Account," $1.5 billion in "Borrower Payment(s)," $3.7 billion in "Consumer Relief," and $537 million in refinancing relief.

Defendants include Bank of America, BAC Home Loans Servicing, Countrywide, Citigroup, JP Morgan Chase, Residential Capital, Ally/GMAC, and Wells Fargo and their subsidiaries.

Collyer found the banks violated deceptive trade laws, the False Claims Act, FINRA (the Financial Institutions Reform, Recovery and Enforcement Act of 1989), the Servicemembers Civil Relief Act, the Bankruptcy Code and Federal Rules of Bankruptcy Procedure.

The United States' original 99-page complaint alleged bank "misconduct related to their origination and servicing of single family residential mortgages," including "issuance of improper mortgages, premature and unauthorized foreclosures, violation of service members' and other homeowners' rights and protections, the use of false and deceptive affidavits and other documents, and the waste and abuse of taxpayer funds."

Uncle Sam said the banks misused 2008 TARP (Troubled Asset Relief Program) funds meant to help distressed homeowners through at least 11 loan modification programs.

Hawaii's attorney general said in a statement that eligibility for the Foreclosure Assistance Program includes "those entities that in the sole discretion of the attorney general are able to use the program funds for housing and financial counseling, public education, mediation, dispute resolution, enforcement of laws and agreements protecting the rights of homeowners and lessees, or other activities that will assist distressed homeowners."

The 3 1/2-year program will fund agencies approved by the attorney general's advisory committee; approved applicants may be eligible for more than one year of assistance.

Individual homeowners may not apply.

"Applicants may include state and county government agencies, for-profit companies, and nonprofit organizations in good standing with the Internal Revenue Service and in compliance with all reporting requirements of the Attorney General's Charities Division," the attorney general said in his statement.

"Applications should focus on one or more of the following priority areas: Housing and Financial Counseling, Dispute Resolution/Mediation, Consumer Education, Foreclosure Hotline or Other Consumer Resources, Enforcement of Laws Protecting the Rights of Homeowners and Lessees."

Eligible agencies may work together and can request funds for personnel, consulting, equipment and other costs. They must provide safeguards and financial controls to ensure that the money will be spent on its intended purpose.

The attorney general said he will "distribute this money as quickly and effectively as possible."

Hawaii expects to hand out its first round of disbursements on July 13.

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