By Shaun Donovan
The landmark National Mortgage Servicing Settlement -- announced last year to speed up relief to struggling homeowners -- was an important milestone in protecting homeowners and cracking down on abusive lending practices.
For years, responsible families facing foreclosure were shortchanged. Many had reached out to their lenders, determined to do whatever was necessary to stay in their homes. Unfortunately, some of the nation's biggest financial institutions lacked that same determination and decency. They failed to answer calls, lost paperwork and, in many cases, didn't even bother to make sure a foreclosure was legitimate.
The families subjected to this abuse deserve justice and the settlement is beginning to deliver. According to a recently released report by an independent monitor, five of the nation's largest mortgage servicers have already distributed roughly $50 billion in direct relief to over 620,000 homeowners. This relief includes more than 310,000 trial or principal reductions. And just last week, $1.5 billion in checks were mailed to families to help compensate for the servicing abuse they received.
Bottom line: This historic agreement is making a profound difference for the American people. Families that were on the brink of losing their homes are now able to stay. Communities that were devastated by the housing crisis are starting to turn the page. And in the big picture, thanks to these and other efforts, the housing market is coming back.
Since the beginning of 2012, 2.3 million families who had been underwater on their mortgages were able to come up for air and nearly $2.5 trillion in homeowners' equity has been created. Foreclosures have been cut by two-thirds since the height of the crisis and are at their lowest levels since 2007. Sales of new homes are up 29 percent from a year ago. There is more to do, but our economy is beginning to make progress. To ensure it continues, we can't rebuild the housing market using the same old policies and practices that got the economy into trouble in the first place. The Obama administration is determined to shape a fairer housing market so that in the future, responsible working and middle-class families no longer have to pay the price for the actions of big banks.
As part of the settlement, we are holding financial institutions accountable like never before. In addition to directing billions of dollars in relief to families, we have created tough new standards to improve customer service and end past abuses in order to prevent the next financial meltdown. This week, the independent monitor released his first compliance report, a landmark moment in our fight to reform the servicing industry that provides the public with a new and transparent look into how banks are treating homeowners. The good news is that gains have been made. The practice of robo-signing -- where banks sign off on foreclosures with little or no review -- has come to an end. The five banks have also stopped charging distressed borrowers a fee just to process a loan modification request.
Unfortunately, other abuses shamefully endure. Most notably, these financial institutions consistently fail to send notices and communicate decisions to stakeholders in a timely manner. This is unacceptable. So the five financial institutions are officially on notice; they must correct these problems or the Obama administration, along with a bipartisan group of 49 state attorneys general, will fine them up to $5 million for each failure or haul them back into court.
Of course, our efforts did not stop with consumer relief and servicing standards. In addition, we continue to empower consumers with new tools to make the best possible housing decisions. Nationally, the Settlement has provided over $300 million for housing counseling and legal aid services. Families now have more places to go to get advice on buying their first place, improving their credit and ensuring that they are being treated fairly in accordance with state and federal laws. Having increasingly informed and responsible home buyers is good for both our communities and the future of the housing market as a whole
Home ownership is a bedrock of security for millions of middle class families. Unfortunately, when the housing market collapsed, many responsible families -- who did everything right and always paid their bills on time -- saw their dreams turn into a foreclosure nightmare. Sadly, for many, it didn't have to be this way. Major financial institutions could have done more to help people stay in their homes and they must be held accountable. The National Mortgage Servicing Settlement is cracking down on abuse, helping families enter a new chapter in their lives and shaping a more responsible housing market for years to come.
Shaun Donovan is U.S. Secretary of Housing and Urban Development