Overview of the National Mortgage Settlement
The National Mortgage Settlement (NMS), also known as the Joint State-Federal National Mortgage Servicing Settlements, was a landmark agreement reached in 2012 to address widespread abuses in the residential mortgage servicing industry during the 2008 financial crisis.
It targeted “robo-signing” practices—where banks mass-produced and filed fraudulent foreclosure documents without proper review—as well as other servicing failures like improper fee assessments, inadequate borrower communication, and dual-tracking (pursuing foreclosures while modification requests were pending).
The settlement aimed to provide financial relief to homeowners, reform industry practices, and compensate states and the federal government for enforcement costs.This was the largest consumer financial protection settlement in U.S. history at the time, involving the U.S. Department of Justice (DOJ), the Department of Housing and Urban Development (HUD), attorneys general from 49 states and the District of Columbia (excluding Oklahoma), and five major mortgage servicers.
Key Participants
- Government Entities: Federal agencies (DOJ, HUD) and state attorneys general.
- Settling Servicers:
- Bank of America (including Countrywide)
- JPMorgan Chase (including Washington Mutual and EMC Mortgage)
- Wells Fargo (including Wachovia)
- Citibank (CitiMortgage)
- Ally Financial (GMAC/ResCap)
Terms and Relief Provided
The settlement, approved by the U.S. District Court for the District of Columbia on April 4, 2012, required the servicers to:
- Consumer Relief: Deliver at least $20 billion in assistance to distressed homeowners nationwide. This included:
- Loan modifications and principal reductions.
- Short sales and deed-in-lieu of foreclosure options.
- Cash payments to borrowers who lost homes to improper foreclosures between January 1, 2008, and December 31, 2011 (up to $125,000 per loan in some cases, though most received smaller amounts).
- By 2016, servicers had provided over $50 billion in gross relief to more than 600,000 families, exceeding the minimum requirements.
- Cash Payments: $5 billion to states and the federal government for housing counseling, legal aid, and community redevelopment in foreclosure-impacted areas.
- Servicing Reforms: Nationwide standards enforced until at least 2015 (with some extended), including:
- Single points of contact (SPOCs) for borrowers in distress.
- Adequate staffing and training for servicers.
- Bans on dual-tracking and improper document execution.
- Enhanced protections for borrowers in bankruptcy, such as timely notices of payment changes.
- Monitoring: Independent oversight by Joseph A. Smith Jr., former North Carolina Banking Commissioner, through the Office of Mortgage Settlement Oversight (OMSO). Regular reports tracked compliance, with penalties for shortfalls.
| Component | Amount/Details | Beneficiaries |
|---|---|---|
| Consumer Relief | $20 billion minimum (actual: >$50 billion) | ~600,000+ homeowners via modifications, forgiveness, etc. |
| Cash Payments | $5 billion | States/federal for counseling and aid programs |
| Servicing Standards | Ongoing reforms (e.g., SPOCs, no dual-tracking) | All borrowers serviced by settling banks |
| Bankruptcy-Specific | Additional settlements (e.g., Wells Fargo: $81.6M for 68,000 accounts; Chase: $50M for 25,000) | Borrowers in bankruptcy denied notices |
Impact and Outcomes
- Positive Effects: The NMS helped stabilize communities hit hard by foreclosures, provided immediate aid to struggling homeowners, and set precedents for ethical mortgage servicing. It influenced later regulations like those from the Consumer Financial Protection Bureau (CFPB).
- Criticisms: Advocacy groups argued the relief fell short—only a fraction of eligible homeowners received aid, and much of it was in the form of credits rather than cash. Some states used funds for non-housing purposes, diluting impact. Enforcement was challenging, leading to supplemental bankruptcy-specific deals (e.g., $50M from Chase in 2015).
- Legacy: While core terms expired around 2017–2018, the reforms shaped ongoing CFPB rules. As of 2025, the settlement’s website remains active for legacy inquiries, and its lessons inform current foreclosure defense efforts, such as those against procedural irregularities in cases like unlawful detainers.
How to Check Eligibility or Get Help
If you believe your mortgage (serviced by one of the five banks) was affected by abuses between 2008–2011:
- Visit the official NMS site: nationalmortgagesettlement.com to search by servicer.
- Contact your state’s attorney general (e.g., California’s FAQ: oag.ca.gov/nationalmortgagesettlement).
- For current struggles, reach out to HUD-approved housing counselors via consumerfinance.gov or file complaints with the CFPB.