Schuette Marks One-Year Anniversary of Homeowner Protection Fund: Announces New Victim Restitution Program

LANSING – August 1, 2013 – (RealEstateRama) — Attorney General Bill Schuette today marked one-year since the historic Homeowner Protection Fund was signed into law with the announcement of a new victim restitution program designed to help residents across Michigan affected by the foreclosure crisis.
“The mortgage crisis devastated Michigan homeowners, and this fund will help victims of foreclosure take the first steps toward rebuilding their lives,” said Schuette.

“When the banks failed to help homeowners, desperate citizens turned to scam artists who promised to help keep them in their home,” Schuette continued. “In the end, the scammer kept the thousands of dollars and did nothing to help the homeowner. We have prosecuted many of these scam artists, but often the money they stole from homeowners is already spent. This new restitution program will help victims of the cases we prosecute get their money back, when they would otherwise be left with nothing.”

Initial payments will be made from the Victim Restitution Program to victims when the Attorney General’s office secures a conviction and court-ordered restitution order for eligible cases. Eligible victims of foreclosure rescue scams will receive letters from Attorney General Schuette notifying them they will receive reimbursement as a result of Schuette’s efforts in the National Foreclosure Settlement and checks will be distributed from the Department of Treasury through county clerks’ offices. Since 2011, Schuette has convicted 30 individuals and companies involved in mortgage relief scams affecting hundreds of victims. The restitution program is anticipated to begin in the Fall of 2013.

Mortgage Settlement and Homeowner Protection Fund Background

The historic National Mortgage Settlement followed state and federal investigations, which alleged that the five mortgage servicers routinely signed foreclosure-related documents outside the presence of a notary public and without personal knowledge that the facts contained in the documents were correct.  This civil law enforcement action also alleged that the servicers committed widespread errors and abuses in their foreclosure processes. Broad reform of the mortgage servicing process resulted from the settlement, as well as financial relief for borrowers still in their homes through direct loan modification relief, including principal reduction.

Michigan citizens received approximately $803 million in benefits from the settlement. The State of Michigan also received a direct payment of $97 million from the servicers.  Schuette worked with the legislature and Governor Rick Snyder to establish the Michigan Homeowner Protection Fund to ensure these funds are directed toward victims of foreclosure. On August 1, 2013, Governor Rick Snyder signed legislation creating the $97 Million Homeowner Protection Fund.

The Homeowner Protection Fund supports the following eight initiatives:

• Foreclosure Rescue Scam Victim Restitution – $7.5 million. Many Michigan residents have fallen prey to foreclosure rescue scam artists who offered to help citizens save their homes. This program, announced today, will provide restitution payments for victims of foreclosure scams.
• Homeowner’s Assistance for military service members and veterans: The Michigan Veterans Homeowner’s Assistance Program (MiVHAP) – $5 million. MiVHAP will provide financial grant assistance to military service members: Active, Reserve, Air and Army National Guard, and honorably discharged Veterans living or having lived in a home in Michigan for hardship related to the foreclosure crisis since 2006.  Surviving spouses of Michigan military service members whose death occurred in combat since 2006 and currently face foreclosure challenges may also be eligible for financial assistance. The formal program was announced May 7, 2013. To date 102 grants have been awarded to veterans in 33 counties across Michigan.
• Michigan Attorney General Home Protection Unit – $6 million. These funds will allow the attorney general to ramp up investigation and prosecution of foreclosure-related crimes. This unit has brought charges in 36 cases since 2009 and there are approximately 72 cases currently under investigation.
• Blight Elimination – $25 million. These funds have focused on blight elimination efforts throughout Michigan overseen by the Department of Treasury. Detroit received $10 million for blight elimination in the city of Detroit and $15 million has been allocated for use throughout the rest of the state.  Given that blighted property contributes to an environment conducive to crime, targeting blight elimination in these areas will support efforts to reduce crime.
• Foreclosure Counseling for Homeowners – $20 million. The Michigan State Housing and Development Authority (MSHDA) and Michigan State University Extension Offices are currently using these funds to expand their much-needed, free homeowner counseling services for citizens seeking to avoid foreclosure.
• Housing and Community Development Programs – $3.7 million. These funds have been allocated to the Michigan Housing and Community Development Fund which develops and coordinates public and private resources to meet the affordable housing needs of low-income households and to revitalize downtown areas and neighborhoods in Michigan.
• Grants to Help Homeowners Refinance – $5 million. These funds have allowed MSHDA to provide grants to help pay the closing costs of citizens who use the Home Affordable Refinance Program. Eligible citizens will receive assistance paying closing costs associated with refinancing their home. For more information, visit http://www.michigan.gov/mshda/0,4641,7-141–291018–,00.html
• Assistance to Homebuyers – $15 million. These funds have assisted both military service members and non-service members by providing grants to offset the purchase price of a home.  This program was administered by MSDHA.

For more information on the mortgage settlement, including a consumer alert and a Frequently Asked Questions document available for download, visit www.michigan.gov/mortgagesettlement.  

Prosecuting the Fraudulent Robosigning Scandal

Earlier this year, Michigan Attorney General Bill Schuette secured the conviction of Lorraine Brown, former president of mortgage document processor DocX, for her role in authorizing the fraudulent signing of mortgage documents filed in Michigan. Brown pleaded guilty to one count of Conducting Criminal Enterprises (Racketeering), a 20-year felony, and was sentenced to 40 months to 20 years in prison. The guilty plea followed an Attorney General investigation into questionable mortgage documentation filed with Michigan’s Register of Deeds offices during the foreclosure crisis.

“Shortcuts like robo-signing are just one part of the mortgage foreclosure crisis,” said Schuette. “The message here is clear – if you break the law, there are consequences. We will continue to prosecute criminals who target and exploit Michigan homeowners.”

In addition to the criminal charge brought against Brown, Schuette reached a $2.5 million civil settlement with Lender Processing Services, Inc., the parent company of the now defunct DocX. The settlement funds will go to the State of Michigan, and the legislature will decide how they will be spent.  Affected consumers will have their documents corrected by LPS.

Contact: Joy Yearout 517-373-8060