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Homeowners receive nearly $2B in foreclosure settlement

Updated: May 21, 2013 4:45PM

More than 25,000 Illinois homeowners have received more than $1.8 billion from a national foreclosure settlement over “robo-signing” and other fraudulent practices.

Last year, the Attorney General’s office participated in a $25 billion nationwide settlement to address “allegations of widespread robo-signing” of foreclosure documents and “other fraudulent practices banks employed while servicing loans of struggling homeowners,” a statement from the AG’s office said.

Illinois ranks among the top five states in payouts to homeowners. On average, borrowers received $71,777 each for principal reduction and refinancing for underwater loans, the statement said.

And more than 3,500 homeowners received first-lien principal reductions averaging $118,235, the attorney general’s office said.

In 60 percent of loan modification files submitted for review, banks failed to notify borrowers within five days of missing documents in applications. That “is a requirement under the settlement to prevent loan servicers from delaying reviews by making multiple document requests,” the statement said.

In 45 percent of the loan modification file reviews, banks continued to make multiple document requests despite the requirements, according to the AG’s office. Local legal aid groups and housing counselors voiced similar concerns.

Failure to meet deadlines increases the chances homeowners could lose their homes to foreclosure, fall further behind on payments or accumulate fees, penalties and interest, the statement said.

The settlement hasn’t signaled the end of the problems. The AG’s office, which serves on the settlement’s state monitoring committee, alerted the monitor on March 25 about potential violations of new mortgage “servicing standards.”

“The new servicing standards were supposed to eliminate headaches for homeowners,” Illinois Attorney General Lisa Madigan is quoted as saying in the statement. “But unfortunately, it seems we’re hearing about the same frustrating experiences.

“Homeowners are getting the runaround, receiving multiple requests for the same information and experiencing continued delays that put them closer to foreclosure,” she said.

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