The Great Recession and the mortgage crisis that accompanied it were bad enough. Many large mortgage lenders and their loan servicers only made it worse. Their failure to help financially stressed homeowners work out ways to stay in their homes led to wave after wave of foreclosures.
This was not only unfair to families that lost their houses; it also had the effect of dampening the real estate market for years on end as all of those foreclosed properties pulled down prices for everyone else.
This article will discuss compensation that may be available in Minnesota following a national settlement on foreclosure practices involving five of the nation's largest mortgage lenders.
Foreclosure in Minnesota
The number of Minnesota homeowners who have lost their houses to foreclosure is strikingly high. According to the state commerce department, in the last seven years nearly 136,000 Minnesota homes have gone into foreclosure. That is almost 20,000 foreclosures per year.
Every state's experience was different. Cumulatively, however, the national figure for foreclosures since the real estate downturn began in 2006 numbers in the millions.
Shamefully, the mortgage lenders and servicers did little to respond to the crisis in a positive way. In fact, all too often they added to the problems. They did this, for example, by refusing to negotiate seriously with homeowners seeking a mortgage modification or work out a short sale.
In many cases around the country, there were also glaring departures from formal legal steps necessary for foreclosure. The notorious "robo-signing" episodes, in which paperwork requirements were cast aside in the rush to foreclose, were part of this larger problem.
Compensation for Wrongful Mortgage Practices
Finally, amid the flood of foreclosures, the federal government and 49 state governments teamed up to hold the largest mortgage lenders accountable for their shoddy and often unlawful foreclosure practices. The result was a $25 billion settlement in which Wells Fargo and four other major banks agreed to provide a measure of compensation.
Besides Wells Fargo, the other four banks are Bank of America, JP Morgan Chase, Citibank and GMAC/Ally Financial. Minnesota will receive some of this money.
Though Minnesota's share of the national settlement is slated to go to the state's general fund, the Minnesota Attorney General's Office does have a specific fund with a value of over $41 million that is potentially available to distressed borrowers and organizations that work with them. This fund is financed by penalties paid by those who have engaged in improper foreclosure practices in Minnesota.
The national settlement also put in place a new set of national standards to regulate the mortgage industry. The rules concern mortgage modifications, short sales and other elements of the foreclosure crisis.
These new rules are hard to summarize in a few short words. If you are behind on your mortgage or feel you were wrongly foreclosed upon, discuss your specific case with an experienced Twin Cities real estate lawyer.