Tennessee Office of the Attorney General Consumer Advocate and Protection Division Jeff Hill, Senior Counsel Jenni Peacock, Senior Counsel April 13, 2012

Who we are Investigation Release – what the settlement does not do Injunctive Relief Military Provisions Monetary and other Relief Contact Information/more information

The opinions expressed in this presentation are solely those of the presenters and should not be construed to reflect the opinion or positions of the Attorney General, the Consumer Advocate and Protection Division, the Director of Consumer Affairs, or the Division of Consumer Affairs. The opinions expressed in this presentation are solely those of the presenters and should not be construed to reflect the opinion or positions of the Attorney General, the Consumer Advocate and Protection Division, the Director of Consumer Affairs, or the Division of Consumer Affairs

 Protects consumers and businesses from unfair and deceptive trade practices. The Consumer Protection division also enforces Tennessee’s Unauthorized Practice of Law (UPL) statute.  Through the Division, actions may be brought on behalf of the Division of Consumer Affairs and in the name of the State of Tennessee.  The Division is unable to represent individual consumer or give legal advice.  In 2009 the Consumer Protection team obtained judgments of nearly $17 million for consumer protection and unauthorized practice of law violations. Over $6 million of that amount went towards consumer restitution.

Created in 1977, the Tennessee Division of Consumer Affairs works to enforce the state Consumer Protection Act and assist consumers and business owners who are victims of unfair business practices. File a Complaint Consumer Education (request a speaker or publication) Online Public Records of Businesses that Failed to Respond to Complaints: Buyer Beware List Problem Contractor List Contacts (615) Consumer Complaint Process Tennessee Division of Consumer Affairs

The settlement, which was announced February 9 th and approved by the court April 5 th, involves 49 state Attorneys General, 47 state banking regulators, several federal agencies including DOJ and HUD, and the nation’s five largest servicers: Bank of America Wells Fargo Citi J.P. Morgan Chase Ally/GMAC

Settlement is a court order which was filed and approved by the U.S. District Court in D.C. Documents are posted on Independent monitor, Joe Smith, hired to ensure compliance. Monitor’s website is Servicers will submit regular reports to monitor which will be made public

Concerns about conduct by servicers Homeowner stories Housing counselor stories

Robosigning Investigation expanded to servicing issues Tennessee joined the multistate and served on the leadership committee

Settlement resolves civil claims that the Attorney General could bring regarding servicing and origination conduct against: Bank of America Wells Fargo Citi J.P. Morgan Chase Ally/GMAC

Settlement does not waive or release: Criminal liability or grant criminal immunity; Liability for other activities like securitization; Claims against MERS; Liability for any other servicers; and Any private claims by individuals or any class action claims. Individuals who have been foreclosed upon and receive a cash payment will not waive any rights to pursue a private action.

 S ingle Point of Contact  Maintain adequate staff to handle demand for loss mitigation relief  Electronic Portals  Dual Track Limitations  Automatic review loss mitigation denials/right of appeal for borrowers

 Detailed monthly statements and enhanced billing dispute rights  Enhanced protections for military personnel  Expedite and facilitate short sales on distressed properties: acknowledge borrower’s initial request within 10 days; respond to specific offer within 30 days.  Restrictions on default fees, late fees, third-party fees and force- placed insurance  Must document authority to foreclose

 Implement auditing procedures to ensure accuracy of accounts and default fees  Adopt procedures to oversee foreclosure firms, trustees, and other agents  Implement specific loss mitigation obligations – customer outreach, communications, timelines to respond to loss mitigation applications, etc.

 Servicer shall offer a loan modification if it is NPV positive, which mandates loan modifications instead of having them be voluntary on the part of the servicer if they meet the NPV test.  Prompt conversion from HAMP trial to permanent modification and provide borrower with a loan modification denial with the right to rebut.  First lien mods should be designed to produce “sustainable modifications according to investor guidelines and previous results” and affordable payments.  Second lien mods shall be designed to be affordable.  No fees may be charged to the borrower in applying for 1 st or 2 nd lien mods.

 Settlement provides for enhanced provisions for military personnel who are covered by the Servicemembers Civil Relief Act (SCRA). Compensation provided in excess of $25 billion relief under settlement  Wrongful foreclosures: DOJ overseeing a full review of foreclosures on servicemembers – if wrongful foreclosure determination, servicemember will receive payment equal to lost equity, plus interest, and additional $116,785.  Interest Charged in Excess of 6%: if mortgage interest charged over 6% after request to lower rate in violation of SCRA, servicers required to provide refund plus interest of amount in excess of 6%, plus additional payment at minimum $1500.

 PCS orders: Under this settlement, all of the participating servicers will provide mandatory short sale agreements and deficiency waivers to certain servicemembers who are forced to sell their homes at a specified loss due to a Permanent Change in Station (PCS) and who are currently ineligible for the DOD’s Homeowners’ Assistance Program.  Veterans Housing Benefit Program: $10 million will be paid into this fund through which the VA guarantees loans provided on favorable terms to eligible veterans. In addition, many veterans with VA-guaranteed mortgages will be eligible for relief provided through the servicers’ $20 billion consumer relief obligations.  Foreclosure Protections for Servicemembers Receiving Hostile Fire / Imminent Danger Pay: Extends prohibition of servicers foreclosing on servicemembers without first securing a court order to all servicemembers, regardless of when their mortgage was secured, who within nine months of the foreclosure received Hostile Fire/Imminent Danger Pay and were stationed away from their homes.

 $25 Billion  Loan Modifications  Refinance  Direct Payments for Foreclosure Sales  Payment to the Benefit of Tennessee Citizens

 Loan Modification: $46 Million  Refinance: $33 Million  Direct Payments for Foreclosure Sales: $24 Million  Payment for the benefit of Tennessee Citizens $41 Million

 Loan Modification  Tennessee benefit estimate $46 Million  Borrowers who are underwater and behind on payments at certain date  First Lien Principal Reduction  Second Lien Principal Reduction  Short sales/Deeds in Lieu  Anti-Blight  Demolition  Donated REO properties

 Principal Reduction – at least $10 Billion of national settlement must come from principal reduction  1 st Lien Mod Standards:  Mod payments should target DTI of 31%  DTI requirements waived if loan is 180+ days delinquent so long as payment reduced by at least 20% and LTV ≤ 120%  Modified LTV ≤ 120%  Payments of interest & principal must be reduced by at least 10%

 2 nd Lien Mods required:  (1) When successful 1 st lien proprietary, non-HAMP mod completed by servicer with minimum 10% reduction in payment; income verified; UPB at or below applicable limits and post-mod DTI (1 st lien only) between 25-31%; or  (2) If servicer completed successful proprietary 1 st lien mod and 2 nd lien loan amount is greater than $5000 UPB w/ current monthly payment greater than $100, servicer must follow specific requirements to modify the 2 nd lien

 Five servicers receive credits for providing relief. For example, there are different formulas for different types of principal reduction:  Portfolio v. non-portfolio loans  LTV: reduction of principal from greater than 175% down to 175% are substantially discounted  Converting existing forbearance is discounted  Earned forgiveness for payments over three years qualify but are discounted  2 nd liens are discounted, with amount of discount tied to performance/delinquency status  Credit ranges from $1 credit for $1 payment (write-down of 1 st lien portfolio loan with LTV ≤ 175%) to $.10 credit for $1 payment (write- down of 2 nd lien that is 180+ days delinquent

Other Homeowner Assistance  Up to $7 Billion nationally allocated for other types of assistance with varying credits depending on activity, including:  Facilitation of short sales  Unemployment payment forbearance or forgiveness  Relocation assistance for homeowners facing foreclosure  Balance deficiency waivers  Funding for remediation of blighted properties  Servicemember short sale program  The last few categories have caps for credit to ensure servicers utilize more significant forms of relief like short sales and forbearance.

Other Assistance – Anti-blight Provisions  New requirements for servicers to deter community blight:  When servicer decides not to pursue a foreclosure action, the servicer must notify the borrower and local authorities of decision to release the lien and not pursue foreclosure on the property.  Inform the borrower in 14-day pre-foreclosure notice that the borrower continues to have a responsibility to maintain the property and pay taxes until a sale or transfer of title has occurred. Must also request that the borrower give notice if intends to abandon the property so they can discuss the possibility of surrendering the property in exchange for compensation.  Develop and implement policies to enhance its participation in state and local anti-blight programs such as land banks/servicers, neighborhood stabilization programs, and nonprofit redevelopment programs.  Implement policies to ensure REO properties do not become blighted.

 SB 3424/ HB3670  Authorizes local governments to create grant programs to provide funding to homeowners and developers who invest in blighted property for the purpose of providing stabilization of the value of the neighborhood and increase the value of such property.

Other Assistance – Anti-blight Provisions  Servicers can receive credit for engaging in various anti-blight provisions. There is a max of 12% for anti-blight credits. For example:  The servicer will receive $.50 credit for each $1 of forgiveness of principal associated with a property where the servicer does not pursue foreclosure.  The servicer will receive $1 credit for each $1 cash costs paid by the servicer for demolition of a blighted property.  The servicer will receive $1 credit for each $1 for REO properties that the servicer donates to accepting municipalities or non-profits or to disabled servicemembers or relatives of deceased servicemembers.

 Refinance  Tennessee benefit estimate $33 Million  Eligibility:  Homeowners current on mortgage payments  No late payment within last 12 months; and  Not in foreclosure in last 24 months  Underwater  No loan mod or bankruptcy within last 24 months  Current interest rate is > 5.25 %  Servicer reduces interest rate to ≤ 5.25%

 Direct Payments for Foreclosure Sales  Tennessee benefit estimate $24 Million  Estimated to be $ per homeowner  Foreclosure Sale by one of the five participating servicers between January 1, 2008 and December 31, 2011  Due to economic hardship; or  Mistake by servicer  Settlement Administrator will be hired by the multistate group soon. Eligible homeowners will receive claim form.  If homeowners are concerned servicers don’t have their current addresses, they can call the Attorney General’s Office at to provide new address. We will pass it on to the settlement administrator.

Separate federal foreclosure relief program  OCC entered into consent orders with 14 servicers last year. Under settlements, independent review of loans with foreclosure activity between  Please tell consumers to call or go to for more information.  Consumer must submit form requesting review by July 31,  If wrongdoing is found, could receive additional payments to compensate for errors, delays, wrongful denial of loan modifications, and wrongful foreclosures.

Payment for the Benefit of Tennessee Citizens  $41 Million  Primarily used to continue and expand existing foreclosure prevention programs  Additional funds paid to Legal Aid organizations across Tennessee  Programs available to help Tennessee homeowners regardless of which institution services their loans (not limited to these five)

Payment for the Benefit of Tennessee Citizens  Vast majority of funds paid to our partner, the Tennessee Housing Development Agency, to supplement existing programs  Free foreclosure prevention counselors across Tennessee  Supplement the Keep My TN Home program to provide assistance in paying mortgage for homeowner suffering medical hardship  More information available at

 Contact servicer directly at following numbers to ask for help under the settlement: Ally/GMAC: Bank of America: Citi: JPMorgan Chase: Wells Fargo:

 If having problems with servicer, contact a free foreclosure prevention counselor.  List of THDA network of counselors across Tennessee available at  Call HOPE hotline at HOPE (free telephone counseling, in English and 170 other languages, 24 hours a day, 7 days a week, 365 days a year).

 Hiring someone to help monitor the settlement and maximize benefits for Tennessee homeowners.  Consumers can call to report problems with servicers.  Consumer education and outreach efforts

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