AUGUSTA — Maine is in line to receive $21 million from a multistate settlement against the nation's largest mortgage lenders over wrongful foreclosures and fraud.
Attorney General William J. Schneider announced Thursday the state had joined a $25 billion federal-state agreement. A consortium of 49 state attorneys general joined U.S. Attorney General Eric Holder and U.S. Housing and Urban Development Secretary Shaun Donovan in announcing the national settlement Thursday in Washington, D.C.
Only Oklahoma did not join the lawsuit against the nation's five largest banks: Bank of America, Citigroup, JPMorgan Chase, Ally Financial and Wells Fargo.
The deal is one of the largest since the 1998 settlement with the tobacco industry. The agreement finalizes negotiations designed to hold banks accountable for falsifying documents related to home foreclosures in several states.
The agreement cuts mortgage debt for about 1 million homeowners. Another 300,000 will have their loans refinanced at lower interest rates. About 750,000 who were foreclosed on would each be compensated $2,000.
"This agreement lays out the best first step to get relief directly to eligible Maine borrowers who were harmed,” said Maine's Schneider in a statement. "The statewide impact of these prohibited foreclosure practices will be offset through funding for foreclosure-prevention programs, legal assistance to homeowners in foreclosure and compensation to the state’s General Fund."
According to the Attorney General's Office, Maine borrowers who are in default on their mortgages will receive an estimated $7 million in direct borrower relief through principal reduction, short sales and borrower transition efforts.
Mainers who lost their homes to foreclosure from Jan. 1, 2008, through Dec. 31, 2011, will qualify for cash payments from a $1.9 million fund.
The state will receive a direct payment of $8.2 million for foreclosure-prevention programs, legal assistance to homeowners and the General Fund, according to the AG.
Nationally, loan servicers will commit a minimum of $17 billion directly to borrowers through a series of homeowner-relief-effort options. According to the U.S. Attorney General's Office, the structure of the settlement will yield an estimated $32 billion in direct homeowner relief.
In addition to monetary payout, the settlement means homeowners will receive comprehensive new protections from loan servicing and foreclosure standards. An independent monitor will ensure mortgage servicer compliance.
Going forward, the government will be able to pursue civil claims outside the agreement. Borrowers and investors can also pursue individual, institutional or class-action cases.
State attorneys general and federal agencies will continue to investigate and pursue other aspects of the mortgage crisis, including securities cases.