Clinics at the UALR Bowen School of Law will receive $500,000 from Arkansas’ portion of the landmark multibillion dollar settlement with five of the nation’s largest banks over allegations of fraud and abuse within the mortgage servicing industry.
Attorney General Dustin McDaniel announced that Arkansas has joined other states and the federal government in the agreement, which provides direct financial relief to Arkansas consumers at risk of losing their homes to foreclosure and to those who currently owe more than their property is worth. It also requires the banks to implement strict new mortgage servicing standards to prevent future foreclosure fraud. The five federally regulated lenders account for about 60 percent of the mortgage servicing market nationwide.
“This settlement will provide tangible benefits to struggling Arkansas homeowners in the form of principal write-downs and refinancing opportunities,” McDaniel said. “This is an important means for holding the banks accountable for their bad behavior during the mortgage crisis. We will continue to monitor the mortgage servicing industry and take further action if necessary.”
Arkansas will receive an estimated $39.4 million in the settlement. Of that, the Arkansas Access to Justice Commission will receive $2 million to provide equal access to justice for Arkansans affected by the mortgage crisis. The University of Arkansas School of Law in Fayetteville and Bowen will each receive $500,000 to support legal aid clinics at both law schools.
The lenders will dedicate approximately $11.8 million toward first- and second-lien principal reduction and other forms of loan modification relief in Arkansas. Another $5.7 million will be set aside for refinancing of loans to underwater borrowers. Arkansans who lost their homes to foreclosure from Jan. 1, 2008, to Dec. 31, 2011, and suffered servicing abuse would be entitled to a share of approximately $8.5 million.
A payment to the State of $13.4 million will be directed to government agencies that offer housing assistance and legal help to low- and middle-income Arkansans. McDaniel said he would direct $9 million of those funds to the Arkansas Development Finance Authority in support of ADFA’s programs that provide down payment assistance to homebuyers, foreclosure counseling to existing homeowners and financial literacy programs, as well as other ADFA programs related to housing and economic development in the State.
Approximately $1.4 million will be directed to the state treasury for costs and fees associated with the settlement agreement