EXHIBIT 25
AN OVERVIEW OF 

THE HOME FORECLOSURE PROCESS 

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An Overview of the Home Foreclosure Process 

Among the most prominent features of the current housing crisis has been 

an unprecedented jump in the incidence of mortgage delinquencies and 

foreclosures. Public policy and financial market observers have attributed 

delinquency and foreclosure increases to a wide range of causes and have 

offered varying policy prescriptions for what remains a continuing 

problem. Allegations of improper or deficient practices on the part of 

mortgage originators and servicers have also been a major source of 

controversy over the past few years. By identifying and describing the 

procedures and requirements that characterize an appropriately executed 

foreclosure process, FHFA-OIG seeks to provide useful context and 

understanding for policymakers and members of the public. 

Most home purchases in the United States are financed through loans 

provided by banks or other lenders. Lenders, as part of the legal process 

that provides cash financing to borrowers, typically require a secured 

interest or mortgage on the property financed. Borrowers agree to accept 

the secured interest on their properties and to repay the loans provided 

over time. The foreclosure process typically commences only after a 

borrower has stopped repaying the loan (meaning that the loan has gone 

into default); the lender therefore uses the foreclosure process to recover 

the proceeds of the loan through the sale of the property. Foreclosure 

involves specific rights and obligations with respect to both the 

homeowner/borrower and the lender (or its representatives) through 

each step of the process. 

Before turning to default and the foreclosure process, however, this 

overview reviews the legal process supporting mortgage loans. It next 

turns to default, the gateway to foreclosure, before discussing the 

foreclosure process and loss mitigation options. This discussion will also 

identify sources of information regarding federal programs designed to 

assist homeowners who may be involved in, or at risk of, foreclosure 

proceedings. 

FUNDAMENTALS OF THE MORTGAGE 

A mortgage is a loan secured by real estate collateral, specifically the 

borrower’s house or apartment.a While the term “mortgage” is used 

colloquially to refer to both the loan and the security, there are actually 

two separate legal documents: a note and a security instrument. 

Foreclosure:

The legal process used by a

lender to secure possession

of a mortgaged property.

a Although real estate investors may 

also finance their purchases of 

commercial properties, such as office 

buildings and rental apartment 

complexes, through mortgage debt, 

this discussion will center 

specifically on residential mortgages. 

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The Note 

The note represents the promise or agreement of the homeowner 

(mortgagor) to repay the loan to the lender or noteholder and specifies the 

terms of repayment, such as the interest rate and schedule of payments. 

Most mortgage notes are freely transferable from the original lender to 

others. Lenders, in fact, sell most loans to third parties, either directly or 

through the securitization process in which groups of mortgages are 

pooled together and sold as a security to investors. The Enterprises are the 

most prominent participants in the purchases and sale of mortgages; they 

accounted for approximately 70% of the nation’s issuances of MBS in 

2010. Rather than lend directly to homeowners, they purchase mortgages 

from the original lenders and other buyers. The mortgage note specifies 

that the borrower must repay the noteholder, which may differ from the 

original lender if the loan is sold. 

Figure 9. Mortgage 

The Security Instrument 

The security instrument is the separate legal document or agreement that 

pledges the house as collateral for repayment of the note. The security 

instrument goes by various names, such as the “mortgage,” the “deed of 

trust” (DOT), or the “trust deed,” depending on its form and the state in 

which the house is located. In many states, it is typically recorded in the 

county recorder of deeds offices in order to establish the mortgagee’s 

interest in the property as a matter of public record. This is important 

because it establishes the mortgagee’s rights in the property relative to 

other parties, including other mortgagees. The majority of mortgages are 

recorded using a private recordation company known as the Mortgage 

Electronic Registration System (MERS). When MERS is used, it is listed 

in county property records as the mortgagee, while the real mortgagee is 

tracked in MERS’ private registry. The validity of MERS’ various 

Securitization:

A process whereby a financial

institution assembles pools of

income‐producing assets

(such as loans) and then sells

an interest in the cash flows

as securities to investors.  See

page 20, Figure 1.

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processes has been the subject of significant and on-going legal 

controversy. 

The form of the security instrument affects the foreclosure process. 

Legally speaking, a mortgage is the granting of a lien. The homeowner, as 

mortgagor, retains title to the property and grants a contingent interest to 

the lender as mortgagee. Alternatively, a DOT is more akin to a sale and 

repurchase: the homeowner, as trustor, gives title to the property to the 

DOT trustee, who holds it on behalf of the lender as beneficiary. The 

DOT trustee is typically a title company or a local attorney. The DOT 

trustee is charged with releasing the deed to the trustor if the loan is paid 

off or with foreclosing if the trustor defaults. In the standard DOT 

arrangement, if the homeowner defaults, the beneficiary noteholder will 

appoint a substitute trustee, often an affiliate, to handle foreclosure. The 

precise duties of DOT trustees may be a potential issue in foreclosures.b

Figure 10. Deed of Trust

Lien:

The lender’s right to have a

specific piece of the debtor’s

property sold if the debt is

not repaid.  With respect to

residential mortgages, the

noteholder retains a lien on

the house (as evidenced by

the mortgage or deed of

trust) until the loan is repaid.

b DOT trustees should not be 

confused with securitization trustees. 

Many securitizations involve a trust 

that holds legal title to the mortgages 

and notes. These trusts have a 

trustee – a major financial institution 

– that acts as an agent for the trust, 

carrying out functions such as 

remitting payments to investors in 

the securities issued by the trust and 

reporting to investors on the 

performance of the trust’s mortgages. 

The actual management of the 

mortgages, though, is carried out by 

another entity, known as the servicer. 

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The Servicer 

All mortgage loans are “serviced,” meaning the payments are collected 

and the loan otherwise is administered, including the release of liens upon 

payoff or the management of defaults. The servicer may be an arm of the 

original lender, or it may be an unrelated third party, in which case it is 

acting on behalf of the current owner of the loan, typically under a detailed 

contract known as a “pooling and servicing agreement” or “loan servicing 

agreement.” As the majority of mortgage loans are sold by their original 

lender (sometimes referred to as the loan’s “originator”), most loans have 

servicers that are unaffiliated with the original lender. For example, the 

Enterprises do not service any of the loans they own themselves; instead, 

they use third-party servicers, typically affiliates of the parties that sold the 

loans to them. 

Subcontracting arrangements are common in servicing, so a borrower’s 

contact may in fact be with a subservicer, a vendor, or an attorney engaged 

by one of these parties. Both servicing and subservicing contracts 

frequently impose limitations on the servicer’s ability to manage the loan, 

including when and how the servicer may modify or otherwise restructure 

a loan. 

DEFAULT 

Default is the prelude to foreclosure. Although various technical defaults 

are possible, the typical default is a failure to make payments as required 

on the mortgage. Most mortgages require defined payments each month 

(though the amount due may vary if the mortgage has an adjustable rate), 

and mortgage servicers will often refuse to accept partial payments. 

Figure 11 illustrates the remediation process for a defaulted loan. The 

outcomes following a default depend on factors such as the amount and 

degree of delinquency, the borrower’s overall financial situation, the value 

of the property and amount of indebtedness, the servicer’s economic 

interests (as distinct from the mortgagee’s), and constraints placed on the 

servicer by contract and applicable laws. Thus, a defaulted residential 

mortgage may return to good standing, or be modified, or the property 

may be sold or repossessed by the mortgagee via foreclosure or a 

voluntary surrender. 

Generally, servicers will not commence a foreclosure until a mortgage is 

90 days delinquent – that is, until the borrower has missed three 

consecutive payments. Thus, a homeowner can conceivably fall behind on 

a mortgage for a month or two and catch up without the servicer 

commencing a foreclosure. However, it is important to note that a servicer 

For more information on the

servicer, see pages 26‐27 of

this report, Selected FHFA

Programs and Activities.

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may legally begin foreclosure proceedings before a mortgage is 90 days 

late. Ninety days is a common practice, not a legal requirement. 

Figure 11. Foreclosure Process Flowchart 

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Loss Mitigation 

In some cases, the default may be cured and the loan reinstated. In 

addition, depending on individual circumstances, alternatives may exist 

that permit defaulted borrowers to remain in their homes while addressing 

their payment delinquency. It is important to note that most of these 

options are voluntary, but state law and contractual arrangements, 

including the acceptance of MHA program funds from Treasury, may 

trigger particular loss mitigation duties on the part of the servicer. 

Mediation. Many states offer or require pre-foreclosure mediation 

between homeowners and servicers. In some states servicers are required 

to mediate in good faith in order to proceed with foreclosure. This may 

include presenting the homeowner with all appropriate paperwork for a 

foreclosure and having authority to accept settlement offers.

Modification. Common modifications include extending the mortgage’s 

maturity date, adding past-due payments to the end of the mortgage, and 

making both permanent and temporary interest rate reductions. In most 

cases, when appropriately applied, these measures will lower the 

borrower’s re-amortized monthly mortgage payment to a more affordable 

level. 

Reductions in the borrower’s unpaid principal balance are uncommon. 

Although HAMP permits principal reductions at participants’ option, the 

Enterprises do not provide for principal reductions in their implementation 

of HAMP. Homeowners should be aware that under certain circumstances 

the forgiven debt may be deemed income for tax purposes.1 

Forbearance. Lenders may always exercise forbearance on defaulted 

loans, meaning that the lender may simply decline to proceed with 

foreclosure. Homeowners have no right to forbearance, unless they are 

active duty military servicemembers covered by the Servicemembers Civil 

Relief Act or have been so within the previous 90 days. Note that some 

types of modifications, such as ones that tack past-due balances onto the 

end of loans as balloon payments, are sometimes referred to as 

forbearance. 

By contrast to payment reductions, payment forbearance involves 

temporarily suspending the need to make mortgage payments. In their 

guidance to loan servicers, Fannie Mae and Freddie Mac permit payment 

forbearance for up to six months in the cases of unemployed borrowers. 

Servicers must consider unemployed borrowers for such forbearance 

A detailed listing of borrower

eligibility criteria for HAMP

and other MHA assistance

programs is available at

www.makinghomeaffordable.

gov.   

The websites of Fannie Mae

(www.fanniemae.com) and

Freddie Mac

(www.freddiemac.com)

incorporate utilities that

permit borrowers to learn

whether those organizations

guarantee or own specific

home loans.

Mediation:

Mediation is a process by

which a neutral third party

(mediator) assists the

homeowner and lender in

reaching a fair, voluntary,

negotiated agreement.  The

mediator does not decide

who is right or wrong.

Figure 12, at the end of this

overview, lists those states

that offer or require

mediation as part of the

mortgage loan default

remediation process.

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before consideration for a HAMP loan modification. Borrowers who are 

not offered any such forbearance must be evaluated for HAMP. 

Refinancing. Another option for handling a defaulted loan is to replace 

it with a new loan via a refinancing. The terms of the new loan can be 

whatever the borrower and new lender negotiate; the proceeds of the new 

loan are used to pay off the balance on the old loan. When the old lender 

is paid off, the old lender releases its lien on the property. 

The difference between refinancing and modification is that refinancing 

entails a new loan, whereas modification is simply a change to the terms 

of an existing loan. A refinancing can involve the substitution of a new 

lender for the existing lender or a new loan from the existing lender, 

whereas a modification involves the same lender. Because a refinancing 

involves a new loan, there are generally closing costs associated with a 

refinancing, whereas modification may or may not involve fees to the 

borrower. 

Traditionally, refinancing requires the payment in full of the existing loan. 

Most mortgage loans have “due on sale” clauses that require payment of 

the full balance of the loan upon the sale of the property and further define 

a refinancing as a sale. Unless the existing mortgage is paid off, the 

existing mortgagee continues to hold a lien on the property that is senior to 

the new lender’s. Payment in full via a refinancing thus requires the 

Common Misperceptions About Enterprise Policies for HAMP Participants

Published reports indicate that mistaken or outdated understandings may persist among participants (both

servicers and borrowers) in HAMP for loans owned or guaranteed by the Enterprises.  Three common

misperceptions are discussed below:

 HAMP Participants Must Be Delinquent.  HAMP does not require homeowners to be actually delinquent

in their payments before participating.  Despite reported cases of mortgage servicers indicating that

homeowners must be delinquent, and in some cases actually encouraging them to fall behind in their

payments, program guidance and the Enterprises’ servicer directives explicitly permit participation by

homeowners who remain current, but for whom default is “reasonably foreseeable.”

 HAMP Requires a Very Long Trial Period.  The Enterprises’ published guidance states that the initial trial

period for HAMP participants “must be three months long for mortgage loans already in default and four

months long for mortgage loans where the servicer has determined that default is imminent but has not

yet occurred,” contrary to reported instances of borrowers making trial payments for much longer.

 The Foreclosure Process Can Proceed While Loss Mitigation Efforts are Underway.  As a result of FHFA’s

Servicing Alignment Initiative, current Enterprise guidance states that servicers may not commence the

foreclosure process as long as they are engaged in a good faith effort with the borrower to resolve the

delinquency.  “Dual tracking” a single loan for both foreclosure and modification is prohibited.  

Additionally, before a loan is referred for foreclosure, the servicer must also perform a formal review of

the case to ensure that appropriate alternatives were considered.

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homeowner to have equity in the property, as today lenders will almost 

never extend credit beyond the value of the property (above a 100% loanto-value ratio). Accordingly, refinancing has not been an option, 

generally, for borrowers who are underwater, even if they are current on 

their mortgage. However, the Enterprises will refinance qualifying 

underwater mortgages they own or guarantee under the federal 

government’s Home Affordable Refinancing Program (HARP). Loans 

that are held on banks’ balance sheets or in private-label securitizations 

are not eligible for HARP. 

In addition, some lenders will accept a “short refinancing” in which they 

receive less than the full unpaid principal balance, may forgive the 

remaining balance, and release the lien. They may choose to do so if they 

believe that they will make more in a partial payment via a refinancing 

than they will in a foreclosure sale. FHA, for example, offers a shortrefinancing program: for qualifying borrowers who do not currently have 

FHA-insured loans, FHA will insure a new first lien mortgage loan at up 

to 97.75% loan-to-value ratio based on a fresh appraisal. This means that 

the existing lender must agree to a write-down of the balance as part of the 

refinancing. FHA requires that the existing lender reduce the existing 

balance by at least 10% and that the combined loan-to-value ratio of all 

mortgages on the property be no more than 115%. While short 

refinancing may be a valuable solution for underwater borrowers, 

refinancing with a new lender is often very difficult for borrowers with 

impaired credit scores (which includes any borrower who has defaulted), 

or even for those with relatively good credit scores. 

FORECLOSURE AND ITS EFFECTS 

If loss mitigation efforts do not succeed, the defaulted loan will proceed to 

foreclosure. There are two basic types of foreclosure. Judicial 

foreclosures proceed through the court system, while nonjudicial 

foreclosures take place outside it. The type of foreclosure process and 

other specific features are governed by state law, which varies 

considerably among the states, and by the terms of the mortgage itself. 

Some mortgages permit only one type of foreclosure. Some states permit 

only one type of foreclosure, while others provide for the possibility of 

either. State law can also vary depending on the type of property involved 

(its size and use) and by whether the mortgage was a purchase money 

mortgage or a refinancing of a previous mortgage. This overview is 

designed to present a general description of the foreclosure process. 

Actual state law may vary from the process described herein, and this 

overview should not be relied upon as a legal guide. 

Equity:

In the context of residential

mortgage finance, equity is

the difference between the

fair market value of the

borrower’s home and the

outstanding balance on the

mortgage (and any other debt

secured by it, such as home

equity loans).

Underwater:

Term used to describe

situations in which the

homeowner’s equity is below

zero (i.e., the home is worth

less than the balance of the

loan(s) it secures).

On October 24, 2011, FHFA 

announced revisions to HARP to 

expand the number of eligible 

homeowners. FHFA-OIG will 

discuss these revisions in greater 

detail in the next Semiannual 

Report. 

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Judicial Foreclosure 

A judicial foreclosure is a litigation process with a specific remedy. 

Generally, the loan servicer, on the noteholder’s behalf, commences the 

foreclosure by filing a suit against the homeowner. If those bringing the 

suit cannot prove that they are acting on behalf of the party entitled to 

repayment under the terms of the note, they may lack legal standing to do 

so. Similarly, a foreclosure may be invalid if the foreclosing party or its 

representative files suit before becoming the holder of the note and the 

mortgagee. 

To begin a foreclosure action, the noteholder’s representative files various 

documents with the court in the form of a “complaint.” It also must serve 

the complaint to the homeowner, notifying him or her of the litigation. 

Additionally, notice must typically be sent to all junior lienholders, such 

as home equity lenders. The specific requirements vary by state, but state 

law typically requires the foreclosing party to assert for the record that: 

 the homeowner is indebted to the foreclosing party; 

 the homeowner has defaulted on the loan; 

 the loan is secured by a mortgage, and the foreclosing party is or 

represents the mortgagee; and 

 service of process has been made on the homeowner. 

These are typically made via affidavits – sworn written statements 

submitted to the court. For example, the fact and amount of the 

indebtedness are typically established via an affidavit of indebtedness. 

State law requires that affidavits be sworn out by affiants who have 

personal knowledge of the facts to which they attest. Such affidavits are 

typically notarized.

Junior Lienholder:

The security interest that can

be availed only after the

senior lien is satisfied, is

called a junior lien.  The

holder of this security interest

is the junior lienholder.  

Depending on the relative

priority of the junior lien, the

junior lienholder may be the

second mortgagee, third

mortgagee, etc.  For example,

a bank holding a home equity

mortgage on a home is the

junior lienholder to the bank

holding the primary

mortgage.

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Generally, state law requires that a copy of the mortgage note accompany 

the complaint. The foreclosing party may be required to produce the 

original “wet ink” or “blue ink” note. Often state law requires the filing of 

the mortgage itself as part of the complaint, but because recorded 

mortgages (unlike notes) are public records, a reference to the mortgage 

may be sufficient. Some states also require certification of mandatory loss 

mitigation efforts, such as mediation, prior to foreclosure. 

Most judicial foreclosures are not contested and result in default 

judgments against the homeowner. In such cases, it is rare for courts to 

undertake more than a cursory examination of the sufficiency of the 

foreclosing party’s filings. 

Robo‐signing.  In mid‐2010, certain leading mortgage servicers were found to be routinely submitting flawed

affidavits to courts in foreclosure cases.  Affidavits are supposed to be sworn out by affiants with personal

knowledge of the facts, which are attested to in the affidavit, such as the fact and amount of the

homeowner's indebtedness and that the homeowner had defaulted on the loan.  In the course of depositions

in foreclosure cases, servicers were found to have employees whose sole job was to sign foreclosure

affidavits, as many as 10,000 affidavits in a single month by some employees (roughly one per minute).  These

employees had no personal knowledge of any of the facts to which they attested.   

As robo‐signing began to garner media attention, several major servicers imposed voluntary moratoria on

their foreclosure activities.  All have subsequently resumed foreclosures, although some foreclosure filings

have been withdrawn and resubmitted and, in Maryland, a state judge threw out over 10,000 foreclosures

filed by Ally Financial Inc. (formerly known as GMAC, LLC) because of robo‐signing.  Federal banking

regulators commenced an investigation of robo‐signing practices that resulted in consent orders between

leading servicers and the federal regulators, in which the servicers agreed to improved internal controls.  

State attorneys general are still investigating robo‐signing and related issues.  

While media attention was focused on the lack of personal knowledge of the affiants and the sheer volume of

signatures made by individual robo‐signers, more serious issues lurk in the robo‐signing scandal.  In particular,

the backdating of mortgage transfer documents was the focus of the depositions in which robo‐signing was

uncovered.  The date of the transfer of a mortgage is critical for three reasons:   

 First, it may affect whether a servicer has legal standing to foreclose; only the mortgagee has such

standing.  In Ibanez v. U.S. Bank, the Massachusetts Supreme Judicial Court upheld the reversal of a

foreclosure in which the servicer could not prove that the loan had been transferred to the

securitization trust before the foreclosure was commenced.   

 Second, it may affect whether the servicer is a "holder‐in‐due‐course," a special legal status that

prevents the homeowner from raising certain defenses (including that the homeowner was fraudulently

induced into the mortgage) and counterclaims.  A party that receives a loan that is in default cannot be

a holder‐in‐due‐course, so determining the date of transfer is critical to ensure that the homeowner is

not wrongfully deprived of his or her legal rights to raise defenses and counterclaims.   

 Third, for securitized loans, tax and trust law rules depend on the date of the transfer.  If the loan was

transferred too late, there may be adverse tax consequences for the investors in the mortgage‐backed

securities and the transfer may itself be void under trust law.   

Thus, issues related to the timing of transfers of mortgages (often referred to as "chain of title") have

profound legal implications.

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If a homeowner contests a foreclosure, either because of procedural 

deficiencies or on the basis of substantive defenses and counterclaims, 

then the case is litigated like a regular civil action. A homeowner's ability 

to raise defenses and counterclaims depends on whether the foreclosing 

party is a “holder-in-due-course” of the defaulted note. To be a holder-indue-course, the foreclosing party must: (1) possess the actual note; (2) 

have given value for the note and taken it in good faith; and (3) have no 

notice of any defect in the note, including that the note is in default. This 

means that if the note were transferred to the foreclosing party subsequent 

to the default, the foreclosing party is not a holder-in-due-course, so the 

homeowner may raise a full battery of defenses and counterclaims in the 

foreclosure action. 

Show Me The Note.  Foreclosure defense litigation has begun to feature variations of the “show‐me‐the‐

note” defense, in which the homeowner challenges the foreclosing party to prove that it has the right to

foreclose.  In its most basic form, this defense is a demand that the foreclosing party produce the original

mortgage note, but the term refers to a range of challenges relating to the foreclosing party’s standing.   

Critically, the show‐me‐the‐note defense does not involve a claim that the homeowner is not in default.  

Instead, it focuses on whether the foreclosing party is the party that is legally entitled to foreclose and has

made the required evidentiary showings.  Determining the proper party is important for issues of legal

standing, holder‐in‐due‐course status, and the homeowner’s ability to raise various defenses and

counterclaims, and because it affects settlement abilities and incentives.  A portfolio lender, for example, may

have very different settlement abilities and incentives than a third‐party mortgage servicer.

Kemp v. Countrywide Home Loans, Inc., 449 Bankr. 624 (Bankr. D.N.J. 2010) provides an illustration of a

successful “show‐me‐the‐note” defense.  In Kemp, the homeowner had taken out a loan from Countrywide

Home Loans, Inc.  Countrywide subsequently securitized the loan, selling it to a trust named CWABS Asset‐

Backed Certificates, Series 2006‐8.  The Bank of New York served as trustee for the trust and Countrywide as

servicer for the trust.   

The homeowner filed for bankruptcy, having previously defaulted on his mortgage.  Countrywide, as servicer,

filed a claim in the bankruptcy on behalf of the trust.  The homeowner challenged that claim based on the fact

that the mortgage note had not been properly endorsed to the Bank of New York as trustee for the

securitization trust and was never placed in the Bank of New York’s possession.  Accordingly, the homeowner

argued, the trust was not a party entitled to enforce the note, as only a physical holder of the note, a non‐

holder in possession, or someone who has lost a note may enforce a note.  

During the trial, Countrywide produced an “allonge” — a separate sheet of paper to be affixed to a note to

allow room for additional endorsements.  This allonge contained the endorsement that was missing on the

note itself (albeit with an error in the name of the trust).  Countrywide’s official witness, however, testified

that the allonge had been created in anticipation of the litigation.  The official witness further testified that

the original note had never left Countrywide’s possession and that the new allonge had never actually been

affixed to the note — it was simply a piece of paper with an endorsement, but no indication of what had been

endorsed.  

The bankruptcy court denied the claim Countrywide had filed on behalf of the trust because the trust could

not show that it was a party entitled to enforce the note.  The trust was neither a holder of the note (an

owner of the note in physical possession of the note), nor a non‐holder (someone who lacks ownership of the

note) in possession of the note, nor had it lost the note.  Because the Bank of New York, as trustee, and

Countrywide, as its agent, were not entitled to enforce the note, the bankruptcy claim against Kemp was

disallowed.

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If the court awards judgment to the foreclosing party, the property is then 

scheduled for sale, typically by the county sheriff. Sale scheduling is 

determined in part by requirements for advertisement of the sale for a 

minimum time period. The homeowner may, of course, appeal the 

foreclosure judgment. 

Nonjudicial Foreclosure 

Nonjudicial foreclosures proceed rather differently. There are no court 

filings or showings of proof required. Instead, in a nonjudicial 

foreclosure, the foreclosing party must notify the homeowner of the 

default and the scheduled sale. Sometimes this requires a formal “notice 

of intent to foreclose.” It is also required to advertise the sale. 

Advertisement requirements vary significantly by jurisdiction, but 

generally the sale must be advertised in a newspaper of record for the 

community for a few weeks prior to the sale. The assumption in a 

nonjudicial foreclosure proceeding is that the foreclosing party has the 

right to foreclose, provided that it appropriately provides notice and 

advertises the sale. 

A nonjudicial foreclosure may effectively be transformed into a judicial 

foreclosure if the homeowner brings a quiet title action or the equivalent, 

which has the effect of contesting the foreclosure sale’s transfer of title to 

the foreclosure sale purchaser. Conversely, foreclosure sale purchasers 

will sometimes bring subsequent judicial actions to ensure quiet title, 

particularly if there are any questions about the procedural propriety of the 

sale. 

The Foreclosure Sale 

The rules governing the actual foreclosure sale vary by jurisdiction. Sales 

are conducted by auction, but there are usually few if any rules governing 

the actual sale in nonjudicial foreclosures. The timing and the bidding in 

judicial foreclosure sales is frequently specified in detail by statute, 

including minimum bids, appraisal requirements, deposits, and completion 

of payment. Some jurisdictions, however, leave details of the bidding up 

to the local government official, typically the sheriff, who conducts the 

auctions. 

Two constant rules for all foreclosure sales are the order of payment and 

the effect on liens. The proceeds of a foreclosure sale are used first to 

cover the expenses of the sale. They are then paid to the foreclosing party, 

and, if there are surplus funds, to junior lienholders in their order of 

seniority. Rules of lien priority generally follow a first-in-time, first-inright pattern, with the first lienholder to perfect its lien (by making the 

Perfection:

The legal recording of

evidence for a creditor’s lien

on a particular item of

property.

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necessary legal filings or automatically in some cases) having seniority 

over subsequently perfected (or unperfected) liens. There are many 

exceptions to this pattern, however. Notably, state tax liens frequently 

have priority over other previously perfected liens. If any surplus remains, 

it is paid to the (former) homeowner. 

There is no right for prospective buyers (or the foreclosing party) to 

inspect the property before the foreclosure sale. Prior to the completion of 

the sale, the property still belongs to the mortgagor/homeowner. 

Accordingly, third parties tend to discount foreclosure sale purchase bids 

heavily. Although they can ascertain the external condition of the 

property, they cannot discern the layout or condition of the property 

internally, and many foreclosed properties have been damaged prior to 

sale. 

The inability to inspect the property pre-sale, as well as the foreclosing 

party’s ability to “credit bid,” means that there are relatively few bidders 

in most foreclosure sales other than the foreclosing party. Most 

foreclosure sale properties are purchased by the foreclosing party via a 

“credit bid.” This means that the foreclosing party bids the amount it is 

owed on the loan rather than bidding with cash. In other words, a credit 

bidding party merely credits itself rather than writing itself a check. A 

credit bidding party typically bids in the full amount of the debt owed, 

which means that a third-party bidder must be willing to pay a higher cash 

price to win the auction. By credit bidding, the foreclosing party can 

obtain clear title to the property, inspect the property, fix it as necessary, 

and then resell it subsequently. 

It is important to note that foreclosure sales are frequently cancelled or 

rescheduled. This may occur for a variety of reasons, including ongoing 

negotiations between the borrower and the lender; intervening bankruptcy 

filings; and inability to complete procedural steps, including accumulation 

of necessary documentation. 

Cures 

Until the completion of the foreclosure sale, the homeowner may cure the 

default and stop the foreclosure. Typically this requires payment of the 

entire mortgage debt, as the lender will have accelerated the debt. The 

lender may be willing, but is under no obligation, to stop the sale if only 

past due payments are tendered. 

If the homeowner files for bankruptcy, the foreclosure sale is 

automatically stayed, and federal bankruptcy law permits homeowners to 

Acceleration:

The declaring of a debt due

and payable immediately.  

Lenders may possess this

right under certain

conditions, according to the

terms of the obligation or

applicable law.

GARCIA 04160
Federal Home Finance Agency Office of Inspector General | 15 

unwind the acceleration of a mortgage and cure by paying only the past 

due payments and associated costs. 

Deficiency Judgments 

The foreclosure sale may not provide proceeds sufficient to satisfy the 

mortgage debt. In such cases, the noteholder’s representative (and any 

junior lienholders) may seek a deficiency judgment – a legal judgment for 

the remaining amount of the debt. A deficiency judgment is an unsecured 

debt, like credit card debt, and collection follows the procedure for other 

unsecured debt. This means that deficiency judgments are often difficult 

for lenders to collect, as many states place restrictions on wage 

garnishment and unsecured debts are generally dischargeable in 

bankruptcy. Accordingly, noteholders often sell deficiency judgments to 

third-party debt collectors at substantial discounts from face value. 

Attempts to collect these debts are typically subject to the provisions of 

the Fair Debt Collection Practices Act as well as to state debt collection 

law. 

The availability and procedure for a deficiency judgment varies by state 

and foreclosure process. Generally, deficiency judgments are not 

available when nonjudicial foreclosure is used because of concerns that 

private sales might be manipulated to suppress foreclosure sales prices in 

order to produce a larger deficiency judgment. In some states, deficiency 

judgments are available automatically following a judicial foreclosure. In 

others, the foreclosing party must file a motion or a complaint for a 

deficiency judgment. Even then, there is variation as to whether a 

deficiency judgment (if allowed) is awarded as a matter of right or by 

judicial discretion. 

Right of Redemption 

In some states, homeowners have a statutory post-foreclosure sale “right 

of redemption.” This means that the homeowner can redeem ‒ reclaim 

title to ‒ the house by tendering the amount of the unpaid debt and 

foreclosure sale costs. The length of the statutory redemption period 

varies considerably, from as short as 10 days in New Jersey to 2 years in 

Tennessee. The existence of rights of redemption is a factor foreclosure 

sale purchasers are likely to consider, as they run the risk of being 

deprived of their foreclosure sale purchase (even though the purchase 

price is returned). While it is uncommon for foreclosed homeowners to 

come up with the cash to redeem their properties during the redemption 

period, the right is exercised at times. 

Figure 12, at the end of this

overview, summarizes

provisions for right of

redemption by state.

GARCIA 04161
Federal Home Finance Agency Office of Inspector General | 16 

Eviction 

If the former homeowner does not voluntarily surrender the property 

following the foreclosure sale, the foreclosure sale purchaser can have the 

former homeowner evicted. Eviction is also a state law procedure; the 

precise process varies by state law, but it is not always automatic. 

Because foreclosure sale purchasers are often concerned about former 

homeowners damaging the property before they leave, they are often 

willing to negotiate with homeowners regarding relocation timetables and 

costs. They are, however, under no obligation to do so. 

Renters Living in Foreclosed Property 

Sometimes a foreclosed property is occupied by renters. Renters’ rights in 

a foreclosure involving their landlord vary by state. Since 2009, however, 

the Helping Families Save Their Homes Act has included minimum 

protections for renters in the foreclosure of most mortgages, including all 

mortgages owned by the Enterprises. If the renter has a bona fide lease 

entered into prior to the notice of foreclosure, then the renter may occupy 

the property until the end of the remaining term on the lease unless the 

renter is given notice of termination by the foreclosure sale purchaser, in 

which case the renter has 90 days of occupancy rights. If the renter is not 

renting under a lease or the lease is terminable at will, then the renter also 

has 90 days of occupancy rights from notice of termination. Some states 

give renters additional occupancy rights; others merely give renters the 

right to notice of the foreclosure. 

Liability for Insurance, Taxes, and Homeowners’ Fees 

Until title passes to the foreclosure sale purchaser, the homeowner 

typically remains liable for taxes, homeowners’ association dues, 

nuisances, and accidents on the property. Noteholders or their 

representatives typically have the right to force-place insurance on the 

property if the homeowner has failed to maintain insurance payments. 

Force-placement of insurance involves the noteholder’s purchasing 

insurance on the property with itself as the loss-payee. Force-placed 

insurance can be expensive relative to regular insurance, and some 

servicers force-place insurance with their affiliates. 

Post-sale, the liability falls on the property’s new owner. In some 

communities, however, a phenomenon known as “bank walkaway” has 

occurred in which a servicer will commence a foreclosure, but not 

complete it. Frequently, bank walkaway occurs when the property’s value 

is so low that it is not worth the expense of foreclosure. In bank walkaway 

cases, the homeowner remains the owner of the property, although in 

GARCIA 04162
Federal Home Finance Agency Office of Inspector General | 17 

many cases he or she will have moved out because of the anticipated 

foreclosure. Because the homeowner remains the title owner of the 

property, he or she remains liable for property taxes and upkeep. Thus, 

the homeowner could be subject to fines and other penalties if the property 

becomes a nuisance, or the homeowner could be liable for accidents that 

occur. Similarly, the noteholder’s representative may complete the 

foreclosure and purchase the property itself in the foreclosure sale, but fail 

to record the deed in its own name. In such cases, the homeowner remains 

liable for property taxes. 

Impact on Credit Score 

Mortgage defaults, foreclosures, deeds in lieu of foreclosure, and short 

sales can have adverse impacts on consumers’ credit scores. A default, 

foreclosure, deed in lieu, or short sale may remain on a consumer’s credit 

report for up to seven years. A bankruptcy may remain on a consumer’s 

credit report for up to 10 years. The presence of adverse events on credit 

reports is likely to lower a consumer’s credit score, which can make it 

more difficult or expensive for a consumer to obtain credit in the future. 

Credit reports are also used by insurers and employers, so adverse credit 

events can affect the cost of insurance and/or employment opportunities. 

FORECLOSURE ALTERNATIVES 

Depending on individual circumstances, alternatives may exist to 

foreclosure proceedings that reduce expenses or legal liability for troubled 

homeowners. However, like foreclosure, these options will typically 

result in the homeowner’s loss of his or her house. These alternatives may 

include short sales, deeds in lieu, and bankruptcy. The Enterprises 

participate in the federal government’s HAFA program, which is designed 

to encourage alternatives to the foreclosure process for troubled home 

mortgage loans. Participating HAFA servicers may not seek deficiency 

judgments and may provide relocation incentives of up to $3,000 for 

eligible homeowners who tender deeds in lieu of foreclosure or do short 

sales. 

Short Sale 

Lenders may agree to a “short sale,” in which the homeowner conducts a 

private sale of the house, and the lender releases its lien in exchange for 

the sale proceeds, even though the sale proceeds are insufficient to pay off 

the debt. A short sale does not necessarily discharge the homeowner’s 

debt; it merely results in a release of the lien, so the homeowner may still 

be liable for the deficiency. If the lender forgives the deficiency, it may be 

More information on HAFA is

available at

www.makinghomeaffordable.

gov/programs/exit‐

gracefully/Pages/hafa.aspx.

GARCIA 04163
Federal Home Finance Agency Office of Inspector General | 18 

imputed as taxable income for the homeowner, particularly if the 

mortgage had a cash-out component. 

There are certain barriers to a short sale. Servicers are frequently wary of 

short sale offers because of concerns that they are settling the debt at too 

low a price and that the bidder may have colluded with the homeowner. 

In addition, the high rate of denials for short sale offers has made realtors 

reluctant to handle them because realtors are only paid upon 

consummation of a sale and put in more effort in short sales than for 

regular sales. 

Deed in Lieu of Foreclosure 

Lenders will sometimes accept a deed in lieu of foreclosure. This means 

that the homeowner will surrender title and possession of the property 

voluntarily, rather than requiring the lender to go through the full 

foreclosure process. For the lender, a deed in lieu spares the time and 

expense of the foreclosure process. For the homeowner, a deed in lieu 

may be attractive because the terms under which the homeowner 

surrenders the property may be negotiated ‒ the lender may be willing to 

provide the homeowner with some relocation funds or a more generous 

timetable for moving out. 

Critically, a deed in lieu does not extinguish junior liens, so the lender will 

acquire the property with junior liens still attached. Thus, if neither the 

homeowner nor the lender who has taken the deed in lieu pays off the 

junior lienholder(s), the latter may foreclose on the property. 

Accordingly, lenders may be reluctant to accept deeds in lieu when there 

is a junior lien on a property. 

Bankruptcy 

A homeowner may file for bankruptcy at any point before, during, or after 

the foreclosure process. Bankruptcy is a federal judicial proceeding. A 

bankruptcy filing automatically stops the foreclosure process. If a lender 

wishes to proceed with a foreclosure against a bankrupt homeowner, the 

lender must get permission from the bankruptcy court to do so. 

If the homeowner files for Chapter 7 bankruptcy and has defaulted, the 

homeowner will not be able to retain the property after the bankruptcy 

absent the lender’s consent. If the homeowner files for Chapter 13 

bankruptcy and has defaulted, the homeowner may de-accelerate the note 

and cure the default simply by making up missed payments rather than the 

full amount of the note. The homeowner may not, absent the lender’s 

consent, modify the terms of the mortgage in bankruptcy if the property is 

GARCIA 04164
Federal Home Finance Agency Office of Inspector General | 19 

a single-family residence. For multi-family residences, the homeowner 

may be able to restructure the mortgage in bankruptcy. 

Figure 12. Summary of Foreclosure Process by State 

State Foreclosure Process2 Right of Redemption3 Mediation Programs

Alabama Primarily nonjudicial 1 year None

Alaska Primarily nonjudicial No None

Arizona Primarily nonjudicial No None

Arkansas Primarily nonjudicial No None

California Primarily nonjudicial 2 years if court grants

deficiency judgment

Yes4

Colorado Primarily nonjudicial Redemption by lienholders

allowed only within specified

periods

Yes5

Connecticut Primarily judicial Yes, after judgment and

before sale

Yes6

Delaware Primarily judicial No Yes7

District of

Columbia

Primarily nonjudicial In optional judicial procedure

there is a provision for

redemption before judgment

Yes8

Florida Primarily judicial Yes, up to date clerk files

certificate of sale

Yes9

Georgia Primarily nonjudicial No None

Hawaii Primarily nonjudicial No Yes10

Idaho Primarily nonjudicial No None

Illinois Primarily judicial Yes, later of 7 months after

service of complaint or 3

months after judgment

Yes11

Indiana Primarily judicial No Yes12

Iowa Primarily judicial 1 year None

Kansas Primarily judicial 3 to 12 months depending on

percentage of debt that has

been paid

None

Kentucky Primarily judicial 1 year Yes13

For further information 

on homeowner 

assistance programs, 

borrowers should visit 

www.makinghomeaffo

rdable.gov or call 888-

995-HOPE. 

GARCIA 04165
Federal Home Finance Agency Office of Inspector General | 20 

State Foreclosure Process2 Right of Redemption3 Mediation Programs

Louisiana Primarily judicial No None

Maine Primarily judicial Mortgages after 10/1/75, 90

days.  Mortgages prior to

10/1/75, 1 year

Yes14

Maryland Primarily nonjudicial No Yes15

Massachusetts Primarily nonjudicial No Yes16

Michigan Primarily nonjudicial 1 month to 1 year depending

on size of parcel, number of

units, percentage of original

loan outstanding, and

whether property is

abandoned

Yes17

Minnesota Primarily nonjudicial 6 or 12 months depending on

date of mortgage, size of

property, and whether use is

agricultural

Yes18

Mississippi Primarily nonjudicial No None

Missouri Primarily nonjudicial 1 year None

Montana Primarily nonjudicial Generally 1 year; for small

tracts no

None

Nebraska Primarily nonjudicial No None

Nevada Primarily nonjudicial No Yes19

New

Hampshire

Primarily nonjudicial No Yes20

New Jersey Primarily judicial 6 months Yes21

New Mexico Primarily nonjudicial 9 months Yes22

New York Primarily judicial No Yes23

North Carolina Primarily nonjudicial 10 days None

North Dakota Primarily judicial 60 days or 1 year for

agricultural land

None

Ohio Primarily judicial Before confirmation of sale

with the amount of judgment

and associated costs paid

Yes24

Oklahoma Primarily nonjudicial Up to confirmation of sale None

GARCIA 04166
Federal Home Finance Agency Office of Inspector General | 21 

State Foreclosure Process2 Right of Redemption3 Mediation Programs

Oregon Primarily nonjudicial No Yes25

Pennsylvania Primarily judicial No Yes26

Puerto Rico Primarily judicial No None

Rhode Island Primarily nonjudicial No, except if foreclosure by

process of law or by open

entry then 3 years

Yes27

South Carolina Primarily judicial No redemption after sale.

Redemption possible for 5

days after sheriff takes

possession

None

South Dakota Primarily nonjudicial 1 year None

Tennessee Primarily nonjudicial Generally no, could be 2 years

but right to redemption is

routinely waived

None

Texas Primarily nonjudicial No None

Utah Primarily nonjudicial 6 months for judicial

foreclosure

None

Vermont Primarily judicial In judicial strict foreclosure

with no sale, 6 months.  In

judicial foreclosure with sale

may redeem until sale

Yes28

Virginia Primarily nonjudicial No None

Washington Primarily nonjudicial 8 months Yes29

West Virginia Primarily nonjudicial No None

Wisconsin Primarily judicial Up to time of sale; 12 months

after judgment unless creditor

waives right, if waived 6

months

Yes30

Wyoming Primarily nonjudicial 3 months None

GARCIA 04167
Federal Home Finance Agency Office of Inspector General | 22 

ENDNOTES 

 

1 Commissioner v. Wilcox, 327 U.S. 404 (1946). 

2

 National Consumer Law Center, Foreclosure Report: Survey of State Foreclosure Laws 

(online at www.nclc.org/images/pdf/foreclosure_mortgage/state_laws/surveyforeclosure-card.pdf) (accessed Sept. 22, 2011). 

3 Id. 

4

 National Consumer Law Center, Foreclosure Mediation Programs by State (online at 

www.nclc.org/issues/foreclosure-mediation-programs-by-state.html) (accessed Sept. 22, 

2011). 

5

 Douglas County Housing Partnership, Foreclosure Mediation Program (online at 

www.douglascountyhousingpartnership.org/foreclosure.htm) (accessed Sept. 22, 2011). 

6

 State of Connecticut Judicial Branch, Foreclosure Mediation Program (online at 

www.jud.ct.gov/foreclosure/) (accessed Sept. 22, 2011); National Consumer Law Center, 

Foreclosure Mediation Programs by State (online at www.nclc.org/issues/foreclosuremediation-programs-by-state.html) (accessed Sept. 22, 2011). 

7

 Delaware State Housing Authority, NEW Residential Mortgage Foreclosure Mediation 

Program (online at www.deforeclosurehelp.org/mediation.html) (accessed Sept. 22, 

2011); National Consumer Law Center, Foreclosure Mediation Programs by State 

(online at www.nclc.org/issues/foreclosure-mediation-programs-by-state.html) (accessed 

Sept. 22, 2011). 

8

 District of Columbia, Foreclosure Mediation Program (FMP) (online at 

www.disb.dc.gov/disr/cwp/view,a,1299,q,645508.asp) (accessed Sept. 22, 2011). 

9

 Collins Center for Public Policy, Mortgage Mediation (online at 

www.collinscenter.org/page/mediation_home) (accessed Oct. 27, 2011); National 

Consumer Law Center, Foreclosure Mediation Programs by State (online at 

www.nclc.org/issues/foreclosure-mediation-programs-by-state.html) (accessed Sept. 22, 

2011). 

10 Governor of the State of Hawaii, Help for At-Risk Homeowners (online at 

www.hawaii.gov/gov/newsroom/in-the-news/help-for-at-risk-homeowners) (accessed 

Sept. 22, 2011); National Consumer Law Center, Foreclosure Mediation Programs by 

State (online at www.nclc.org/issues/foreclosure-mediation-programs-by-state.html) 

(accessed Sept. 22, 2011). 

11 Circuit Court of Cook County, Mortgage Foreclosure Mediation Program (online at 

www.cookcountyforeclosurehelp.org/) (accessed Sept. 22, 2011); National Consumer 

Law Center, Foreclosure Mediation Programs by State (online at 

www.nclc.org/issues/foreclosure-mediation-programs-by-state.html) (accessed Sept. 22, 

2011). 

12 Indiana Courts, Help With Mortgage Foreclosures (online at 

www.in.gov/judiciary/home/#how) (accessed Sept. 12, 2011); National Consumer Law 

Center, Foreclosure Mediation Programs by State (online at 

www.nclc.org/issues/foreclosure-mediation-programs-by-state.html) (accessed Sept. 12, 

2011). 

GARCIA 04168
Federal Home Finance Agency Office of Inspector General | 23 

 

13 City of Louisville, Kentucky, Mayor Abramson and Congressman John Yarmuth 

Announce Foreclosure Conciliation Project (June 30, 2009) (online at 

www.louisvilleky.gov/Housing/News/2009); National Consumer Law Center, 

Foreclosure Mediation Programs by State (online at www.nclc.org/issues/foreclosuremediation-programs-by-state.html) (accessed Sept. 22, 2011). 

14 State of Maine Courts Judicial Branch, Foreclosure Diversion Program (online at 

www.courts.state.me.us/court_info/fdp/index.html) (accessed Sept. 22, 2011); National 

Consumer Law Center, Foreclosure Mediation Programs by State (online at 

www.nclc.org/issues/foreclosure-mediation-programs-by-state.html) (accessed Sept. 22, 

2011). 

15 Maryland Home Owners Preserving Equity, Maryland’s Foreclosure Mediation

(online at www.mdhope.dhcd.maryland.gov/ForeclosureMediation/Pages/default.aspx) 

(accessed Sept. 22, 2011); National Consumer Law Center, Foreclosure Mediation 

Programs by State (online at www.nclc.org/issues/foreclosure-mediation-programs-bystate.html) (accessed Sept. 22, 2011). 

16 National Consumer Law Center, Foreclosure Mediation Programs by State (online at 

www.nclc.org/issues/foreclosure-mediation-programs-by-state.html) (accessed Sept. 22, 

2011). 

17 Community Economic Development Association of Michigan, Michigan Foreclosure 

Task Force (online at www.cedam.info/resources/mftf/index.php) (accessed Sept. 22, 

2011); National Consumer Law Center, Foreclosure Mediation Programs by State 

(online at www.nclc.org/issues/foreclosure-mediation-programs-by-state.html) (accessed 

Sept. 22, 2011). 

18 Minnesota Housing Finance Agency, Foreclosure Prevention (online at 

www.mnhousing.gov/consumers/home-owners/foreclosure) (accessed Sept. 28, 2011). 

19 The Nevada Judiciary, Foreclosure Mediation (online at 

www.nevadajudiciary.us/index.php/foreclosuremediation) (accessed Sept. 12, 2011); 

National Consumer Law Center, Foreclosure Mediation Programs by State (online at 

www.nclc.org/issues/foreclosure-mediation-programs-by-state.html) (accessed Sept. 22, 

2011). 

20 New Hampshire Judicial Branch, Office of Mediation and Arbitration - Summary of the 

Foreclosure Mediation Program (online at 

www.courts.state.nh.us/adrp/foreclosure/index.htm) (accessed Sept. 22, 2011); National 

Consumer Law Center, Foreclosure Mediation Programs by State (online at 

www.nclc.org/issues/foreclosure-mediation-programs-by-state.html) (accessed Sept. 22, 

2011). 

21 New Jersey Judiciary Foreclosure Mediation Program, Home Page (online at 

www.nj.gov/foreclosuremediation/) (accessed Sept. 22, 2011); National Consumer Law 

Center, Foreclosure Mediation Programs by State (online at 

www.nclc.org/issues/foreclosure-mediation-programs-by-state.html) (accessed Sept. 22, 

2011). 

22 State of New Mexico First Judicial District Court, Forms (online at 

www.firstdistrictcourt.com/Forms.htm) (accessed Sept. 22, 2011); National Consumer 

Law Center, Foreclosure Mediation Programs by State (online at 

GARCIA 04169
Federal Home Finance Agency Office of Inspector General | 24 

 

www.nclc.org/issues/foreclosure-mediation-programs-by-state.html) (accessed Sept. 22, 

2011). 

23 National Consumer Law Center, Foreclosure Mediation Programs by State (online at 

www.nclc.org/issues/foreclosure-mediation-programs-by-state.html) (accessed Sept. 22, 

2011). 

24 Save the Dream Ohio, Help for Homeowners (online at 

www.savethedream.ohio.gov/Homeowners.aspx) (accessed Sept. 13, 2011); National 

Consumer Law Center, Foreclosure Mediation Programs by State (online at 

www.nclc.org/issues/foreclosure-mediation-programs-by-state.html) (accessed Sept. 22, 

2011). 

25 National Consumer Law Center, Foreclosure Mediation Programs by State (online at 

www.nclc.org/issues/foreclosure-mediation-programs-by-state.html) (accessed Sept. 22, 

2011). 

26 National Consumer Law Center, Foreclosure Mediation Programs by State (online at 

www.nclc.org/issues/foreclosure-mediation-programs-by-state.html) (accessed Sept. 22, 

2011). 

27 National Consumer Law Center, Foreclosure Mediation Programs by State (online at 

www.nclc.org/issues/foreclosure-mediation-programs-by-state.html) (accessed Sept. 22, 

2011). 

28 The University of Vermont, Mortgage Issues and Foreclosure (online at 

www.uvm.edu/consumer/?Page=foreclosure.html) (accessed Sept. 13, 2011); National 

Consumer Law Center, Foreclosure Mediation Programs by State (online at 

www.nclc.org/issues/foreclosure-mediation-programs-by-state.html) (accessed Sept. 22, 

2011). 

29 Washington State Department of Financial Institutions, Washington Foreclosure 

Mediation Program (online at www.dfi.wa.gov/consumers/homeownership/foreclosuremediation.htm) (accessed Sept. 22, 2011). 

30 Marquette University Law School, Milwaukee Foreclosure Mediation Program (online 

at www.law.marquette.edu/foreclosure/) (accessed Sept. 22, 2011); National Consumer 

Law Center, Foreclosure Mediation Programs by State (online at 

www.nclc.org/issues/foreclosure-mediation-programs-by-state.html) (accessed Sept. 29, 

2011). 

GARCIA 04170
I. RETURN INTEGRITY & ACCURACY TO FORECLOSURE AND

BANKRUPTCY PROCEEDINGS

A. Put an end to robosigning - signing affidavits filed with the court without 

personal knowledge. 

Affidavits/sworn statements utilized in foreclosure proceedings must be 

accurate as to the amounts owed and the standing of the bank/servicer to 

file for foreclosure and must be based on the signor’s personal 

knowledge of the facts. The affiant must actually review the 

bank/servicer records before signing. 

Assertions made in foreclosure or bankruptcy proceedings shall be 

accurate, complete and supported by competent and reliable evidence. 

Affidavits shall be signed in the presence of a notary. 

Banks/servicers may not rely on an inaccurate affidavit to obtain a 

foreclosure judgment. 

Banks/servicer must have standards for qualifications, training and 

supervision of employees that sign affidavits; and shall ensure that they 

have an adequate number of employees with reasonable time to prepare, 

verify and execute affidavits. 

Banks/servicers shall not pay incentives to employees or third parties to 

encourage speed in the signing of affidavits. 

B. Pre-foreclosure referral notice to borrower: Notice to borrower of their loan 

status 14 days before a delinquent loan is referred to a foreclosure attorney. 

The notice shall contain the following: 

Facts supporting the bank’s/ servicer’s right to foreclose.

The borrower’s right to request: 

- The borrower’s payment history

- A copy of the mortgage note with all endorsements 

- The name of the investor that holds the borrower’s loan.

An itemized plain language account summary that contains: 

- The amount owed and amount required to bring the loan current 

- Terms of the loan 

- How to contact the bank/servicer or a HUD housing counselor 

A summary of the loss mitigation efforts the bank/servicer has undertaken 

to date. 

 

C. Banks/Servicers shall properly document their authority to file a foreclosure 

action.

The bank/servicer must document its right to foreclose on a borrower. 

The bank/servicer must plead the basis for its authority to foreclose. 

The bank/servicer shall summarize this authority to foreclose in the 14 day 

pre-foreclosure notice to the borrower. 

GARCIA 04171
2

D. New protections to ensure accuracy of borrower’s account information 

Bank/servicer shall maintain procedures to ensure the accuracy of 

homeowners’ accounts.

Bank/servicer shall promptly apply homeowners’ payments, including 

posting within 2 days. 

Bank/servicer shall accept and apply (at least two) partial payments when 

the payments come within $50.00 of the scheduled payment. 

When banks/servicers use suspense accounts for mortgages, will follow 

new requirements: 

- disclose to borrower that a payment has been placed in a suspense 

account 

- apply the full payment as of date there is enough for one payment in 

the suspense account 

- cannot use suspense account funds to pay servicer fees until all 

principal, interest and escrow amounts are paid. 

Banks/servicers shall provide to borrowers a monthly billing statement 

showing: 

- The total amount due 

- Allocation of payments, including postings to suspense accounts 

- Unpaid principal 

- Fees and charges 

- Escrow balance 

- Reasons for payment changes, 21 days before change. 

Banks/servicers shall adopt enhanced billing dispute procedures including: 

- Implement methods for lodging complaints, including toll free 

numbers on the monthly billing statement and email access 

- Maintain adequate staff to respond properly 

- Establish a dispute escalation process 

- Implement procedures to promptly fix errors – including inaccurate 

reports to credit reporting agencies. 

The accuracy of the bank’s/servicer’s accounts systems shall be reviewed 

periodically by an independent reviewer. 

Banks/servicers shall send an itemized account summary to homeowners 

14 days before referral to foreclosure. 

E. Required reviews of foreclosure documents 

Banks/servicers shall conduct quarterly reviews of: a sampling of affidavits, 

sworn statements documents used to foreclose in non-judicial states, ownership 

information and loss mitigation summaries prepared by bank/servicer employees 

and agents to ensure the documents are incompliance with the law and this 

agreement.

F. Third-Party provider oversight 

Banks/servicers will adopt procedures to oversee foreclosure trustees, 

independent contractors, and its agents including foreclosure firms, sub-servicers, 

agents, subsidiaries and affiliates.

GARCIA 04172
3

II. ENHANCED LOSS MITIGATION PROTECTION FOR THE BORROWER

A. Loss Mitigation Requirements 

Notify homeowner of all loss mitigation options prior to referral to 

foreclosure. 

Upon receipt of a homeowner’s loan modification application, the 

bank/servicer shall evaluate the homeowner for all available loan 

modifications before referral to foreclosure. 

Servicer shall offer a loan modification if it is NPV positive. 

Homeowners may re-apply for a HAMP modification if the homeowners 

applied under old HAMP standards where there was no pre-qualification 

process. 

HAMP trial plans shall be promptly converted to permanent 

modifications. 

B. Loan modification timelines 

 Banks/servicers must review and make a determination on a borrower’s 

completed loan modification application within 30 days of receipt. 

 Banks/servicers must follow either HAMP or GSE timelines on the loss 

mitigation process, whichever is shorter, for all loans. These timelines 

include things such as the time in which banks/servicers must inform a 

borrower that a loan modification application has been received, what 

documentation is missing, and how quickly the bank/servicer must inform 

the borrower of a loan modification decision. 

C. Dual track restricted 

 1. Pre-foreclosure referral 

If bank/servicer receives a complete loan modification application by day 

120 of delinquency, bank/servicer must review and make a determination 

on the application prior to referring the loan to foreclosure. 

If bank/servicer receives a substantially complete loan modification 

application by day 120 of delinquency, bank/servicer must provide 

borrower an additional 10 days in which to complete the application. If 

bank/servicer receives a complete application by the end of the 10-day 

extension, bank/servicer must review and make a determination on the 

application prior to referring the loan to foreclosure. 

 2. Post Foreclosure Referral 

 Once a loan has been referred to foreclosure, if the borrower submits a 

complete loan modification application within 30 days after the attorney 

letter is sent to the borrower, the bank/servicer must not move for a 

foreclosure judgment or seek a foreclosure sale until it has completed its 

GARCIA 04173
4

review and determination of the application. If servicer offers the 

borrower a loan modification, the servicer must continue to delay any 

action in the foreclosure proceeding until the borrower accepts or denies 

the offer. If the borrower accepts the offer, the foreclosure proceeding is 

suspended unless the borrower fails to perform on the loan modification. 

The borrower may accept verbally, in writing or by making the first trial 

payment. 

 If borrower submits a complete loan modification at any time after 30 days 

following the mailing of the attorney letter but prior to 37 days before a 

scheduled foreclosure sale, the servicer must complete its review of the 

application prior to going to foreclosure sale. If the servicer offers the 

borrower a loan modification, servicer must delay the sale if necessary to 

provide the borrower 14 days in which to accept or deny the offer, and, if 

the borrower accepts, must continue to delay the sale unless the borrower 

fails to perform on the modification. 

 If borrower submits a complete loan modification with 37 to 15 days 

before a scheduled foreclosure sale, the servicer shall conduct an 

expedited review. If the servicer offers the borrower a loan modification, 

servicer must delay the sale to provide the borrower 14 days in which to 

accept or deny the offer, and, if the borrower accepts, must continue to 

delay the sale until the borrower fails to perform on the modification. 

D. Communication of borrower’s status

Banks/servicers shall ensure timely and accurate communication of a 

homeowner’s loss mitigation status to its foreclosure attorneys and court 

mediators.

E. Single point of contact (SPOC). 

 The bank/servicer shall establish an easily accessible 

SPOC assigned to each homeowner who reaches out to the bank/servicer 

due to difficulty making their loan payments. 

F. Duties of SPOC 

One point of communication with homeowner 

Explain loss mitigation options and requirements 

Coordinate document submissions 

Inform homeowner of loss mitigation status 

Ensure homeowner is considered for all loss mitigation options 

Ability to access individuals with ability to stop foreclosure proceedings 

G. Communication with homeowners 

Servicer must commence outreach efforts to borrowers to communicate 

loss mitigation options within the timelines under HAMP or GSE’s 

whichever is earlier. These outreach efforts must be more than prerecorded automatic messages if those fail to result in contact with the 

borrower. 

GARCIA 04174
5

Borrower notices must include contact information for national or state 

foreclosure assistance hotlines and state housing counseling resources. 

Servicer must communicate with the borrower’s authorized representative, 

upon written request of the borrower. This includes communicating with 

state attorneys general or financial regulator offices acting on a written 

complaint submitted by a borrower and forwarded to the servicer. 

Servicer must cease all collection efforts while a complete loan 

modification application is under review or the borrower is making timely 

payments under a trial modification. 

H. Protections for military personnel 

The banks/servicers shall comply with Service Members Civil Relief Act 

and similar state laws and the banks/servicers shall engage independent 

consultants to review foreclosures from January 1st 2009 to December 31, 

2010 for compliance with SCRA. 

If a person has received military orders to commence active military 

service or has been in the military within the last 9 months and is in 

default on his or her mortgage, he or she is entitled to a specially SCRA 

trained SPOC. If the persons’ are not in default, he or she is entitled to be 

routed to an employee specially trained on the SCRA. 

Bank/Servicer must assess whether a troubled borrower is SCRA eligible 

not only at the time of default as required by SCRA, but bank/servicer 

must go beyond the requirements of the SCRA and assess if a borrower is 

SCRA eligible in the following additional circumstances: 1) before a loan 

is referred for foreclosure, 2) within 7 days of a foreclosure sale, and 3) 

the later of promptly after a foreclosure sale and within three days before 

the regularly scheduled end of any redemption period. 

When a service member requests a reduction in the interest rate on debt 

pursuant to the SCRA but does not provide the documentation required by 

the SCRA (military orders), the servicer shall accept orders from the 

commanding officer. 

Servicers shall notify borrowers who are 45-60 days delinquent that they 

may be entitled to certain protections under the SCRA and to counseling. 

The servicer shall include a toll-free number on the notice. 

For active duty service members in combat areas, servicers shall not sell 

or foreclose on their homes (unless there are investor limitations). This is 

an improvement on the SCRA which provides in Section 533 that a stay of 

a foreclosure or sale can only be requested if the mortgage debt was 

incurred prior to military service. Now those in combat areas can receive 

this protection regardless of when the debt was incurred. 

(Non-SCRA provision) Servicers shall not require a service member to be 

delinquent to qualify for a short sale, loan modification or other loss 

mitigation relief if the service member is suffering from financial hardship 

and is eligible for loss mitigation. (This is the basic standard for any nonservice member person. You can qualify for loss mitigation if you are in 

default or in imminent default.) 

GARCIA 04175
6

(Non-SCRA provision) Many times when a service member receives 

Permanent Change of Station (PCS) orders they are underwater on their 

home so they can’t sell, it is difficult to rent at the mortgage amount, they 

can’t get a modification because they are not in default, and they can 

refinance because their old home will no longer be their primary 

residence. Under this new provision, when determining whether a service 

member is suffering a financial hardship with regard to a short sale or 

deed in lieu, the bank/servicer shall take into account whether the service 

member has been ordered to relocate to a new duty station at least 75 

miles away from his/her former home. With regard to a loan modification, 

the servicer shall consider as part of the hardship determination if the 

service member must relocate. (Non- SCRA provision) The Section 

prohibits the servicer from making inaccurate report to credit reporting 

agencies when a service member who has not defaulted before relocating 

obtains a short sale, loan modification or other loss mitigation. 

I. Banks/Servicers shall develop loan portals where: 

Borrowers can check, at no cost, the status of their loan modifications. 

Housing counselors can communicate with banks/servicers. 

Banks/Servicers shall update the status of pending loan modifications 

every 10 days (business). 

J. Denial notice requirements 

The loan modification denial notice shall contain the reasons for denial 

and inform homeowner that he/she has 30 days to rebut the denial. 

If a modification is denied due to investor disallowance, the bank/servicer 

shall disclose the name of the investor and summarize the reasons for 

denial. 

If a modification is denied because it is NPV negative, the servicer shall 

provide in the denial notice the monthly gross income and property value 

utilized. 

K. Independent evaluation of loan modification denial 

All loan modification denials must be submitted for an additional 

independent internal review 

L. Appeal process 

After the bank/servicer denies a loan modification, homeowners have 30 

days to request an appeal of the denial, unless the denial is: 1) an ineligible 

mortgage, 2) an ineligible property, 3) the offer was not accepted by 

borrower, or 4) the loan was previously modified. 

NPV calculation denial: the borrower can contest the property value used 

by the bank/servicer in the NPV test by requesting a full appraisal. 

The bank/servicers shall respond to the homeowner’s appeal in 30 days.

If the bank/servicer denies the modification after the appeal, the denial 

letter shall include a description of other available loss mitigation options. 

GARCIA 04176
7

M. General loss mitigation requirements 

 The bank/servicers shall maintain adequate staffing and systems for 

tracking homeowner’s loan modification documents.

 The bank/servicer shall maintain adequate staffing and caseload limits for 

SPOCs and employees handling loss mitigation. 

 The banks/servicers shall establish reasonable minimum experience and 

training requirements for loss mitigation staff. 

 The banks/servicers shall not use compensation arrangements that 

encourage foreclosure over loss mitigation. 

 The banks/servicers shall not require a homeowner to waive claims and 

defenses as a condition to receive a loan modification (except to settle 

litigation). 

 The banks/servicers shall not charge homeowners a fee to apply for a loan 

modification. 

N. Proprietary First Lien Modifications 

The banks/servicers shall make public all information necessary to apply 

and qualify for all proprietary loan modifications. 

Proprietary loan programs shall be designed to produce sustainable 

modifications and affordable payments. 

The banks/servicers shall track the outcomes, characteristics and 

performance of proprietary loan modifications. 

O. Proprietary 2nd Lien Modifications 

The banks/servicers shall make public all information necessary to apply 

and qualify for all proprietary second lien loan modifications. 

Proprietary second lien loan programs shall be designed to produce 

sustainable modifications and affordable payments. 

P. Short Sales 

Banks/servicers shall make information publicly available on short sale 

requirements. 

Banks/servicers shall develop a short sale process that allows homeowners 

to obtain a short sale evaluation before putting the home on the market. 

Banks/servicers shall confirm in writing that a request for short sale has 

been received. 

The confirmation of receipt shall include information on the 

banks’/servicers’ short sale process. The bank shall send the homeowner 

written notice of any missing documents. 

Banks/servicers must give notice of any missing documents within 30 

days. 

GARCIA 04177
8

Q. Transfer of Servicing of Loans Pending for Permanent Loan Modification 

At the time of transfer or sale, the bank/servicer shall inform the successor 

servicer if a loan modification is pending. 

Any contract for sale or transfer must obligate the successor to accept and 

continue processing loan modification requests and honor trial and 

permanent loan modification agreements. 

Any contract for sale or transfer shall designate the homeowner as a thirdparty beneficiary. 

When a bank/servicer acquires servicing rights from another servicer, the 

bank/servicer will continue processing loan modifications and honor trial 

and permanent modifications. 

R. Loss Mitigation During Bankruptcy 

Bank/Servicer cannot deny loss mitigation to a borrower on the basis that 

a borrower is a debtor in bankruptcy. 

III. RESTRICTIONS ON SERVICING FEES

A. Default fees generally 

All default, foreclosure fees and bankruptcy related service, including 

third-party fees shall be bonafide, reasonable in amount, and disclosed to 

the borrower in detail. 

Banks/Servicer shall keep current its schedule of fees charged to 

homeowners. The fee schedule shall identify each fee, explain the fee and 

state the maximum or how the fee is calculated. 

Banks/Servicer may collect a default-related fee if the fee is for reasonable 

and appropriate services, is disclosed to the homeowner and is not 

prohibited by law, the loan instruments or the settlement agreement. 

B. Attorneys’ fees

Attorneys’ fees charged in foreclosure shall only be for work actually 

performed and shall not exceed reasonable and customary fees. 

If a foreclosure action is terminated prior to final judgment, the 

homeowner shall only be liable for work actually performed. 

C. Late Fees 

If a homeowner is delinquent on two payments and then makes a full 

payment that is applied to the current payment, the bank/servicer cannot 

charge a late fee on the older delinquent amount. 

Banks/servicers shall not collect late fees: 1) while a loan modification is 

being considered 2) while borrower is making timely trial payments and 3) 

while a short sale is being evaluated. 

D. Third-Party Fees 

GARCIA 04178
9

Banks/servicers shall not impose unnecessary or duplicative property inspection, 

property preservation, or valuation fees on the homeowner. 

Preservation fees 

No property preservation fees shall be imposed on homeowners with a 

pending loss mitigation application or in a loss mitigation program unless 

there is a reasonable basis. 

Inspection fees 

Inspection fees shall not be imposed any more frequently than GSE 

timeframes allow. 

 BPO Valuations 

Valuation fees may only be every 12 months unless requested by the 

homeowner for a loan mod or short sale or required as part of the 

foreclosure process.

Price of fees charged 

Default and foreclosure-related services performed by third-parties shall 

be at reasonable market value. If the third party is an affiliate, the 

bank/servicers shall not charge the homeowner more than the market rate 

based on annual market reviews performed by an independent third party. 

Referral fees 

Banks/servicers cannot collect unearned fees or give or accept referral fees 

from third-parties. 

No mark-ups 

Banks/servicers cannot impose its own mark-up on bank initiated 

default/foreclosure services. 

E. Force-Placed Insurance 

Banks/servicers shall not obtain force-placed insurance unless there is a 

reasonable cause to believe a homeowner has not paid for property 

insurance. 

If a homeowner pays into an escrow account, the bank/servicers shall 

continue to advance payments to the insurer regardless of homeowner 

payment. 

Disclosures to homeowners: The banks/servicers must send a written 

notice to the homeowner containing the following: 

- A reminder that the obligation is due and no payment was made; 

- How to prove insurance coverage; 

- That the bank/servicer may obtain coverage at the homeowner’s 

expense and that the cost may be significantly higher and may only 

protect the mortgage holder; 

GARCIA 04179
10

- A notice that the bank/servicer will set up an escrow account and

advance the insurance premiums if the borrower wishes;

- A second written notice must be sent 30 days after the first

mailing;

- The bank/servicer shall accept any reasonable form of written

confirmation of coverage from a homeowner;

- Within 15 days of receipt of evidence of coverage, the

bank/servicer shall terminate the force-placed insurance and refund

to the homeowner all premiums.

The bank/servicer shall continue to make insurance payments if there is a 

lapse in payment and the payments are escrowed. 

Force-placed insurance must be purchased for a commercially reasonable 

price. 

IV. MEASURES TO DETER COMMUNITY BLIGHT

A. When the servicer makes a decision not to pursue a foreclosure action, the servicer

must notify the borrower and local authorities (tax authorities, courts, code

enforcement departments, etc.) of servicer’s decision to release the lien and not

pursue foreclosure on the property.

B. In the 14-day pre-foreclosure notice required to be sent to borrowers, servicer must

inform the borrower that the borrower continues to have a responsibility to maintain

the property and pay taxes until a sale or transfer of title has occurred. Servicer must

also request borrower tell the servicer if the borrower intends to abandon the property

so that they can discuss the possibility of surrendering the property in exchange for

compensation.

C. Servicer must develop and implement policies to enhance its participation in state and

local anti-blight programs such as land banks/servicers, neighborhood stabilization

programs, and nonprofit redevelopment programs.

D. Servicer must implement policies to ensure that REO properties do not become

blighted.

E. Tenants’ Rights

Servicer must comply with applicable state and federal laws governing the rights 

of tenants living in foreclosed residential properties; and, the servicer must 

develop and implement written policies and procedures to ensure compliance with 

those laws. 

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GARCIA 04200
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GARCIA 04201
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GARCIA 04202
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GARCIA 04203
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GARCIA 04204
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GARCIA 04205
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GARCIA 04206
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GARCIA 04207
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GARCIA 04208
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GARCIA 04209
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GARCIA 04210
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GARCIA 04211
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GARCIA 04212
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GARCIA 04213
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GARCIA 04214
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GARCIA 04215
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GARCIA 04217
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GARCIA 04219
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GARCIA 04220
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GARCIA 04223
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GARCIA 04224
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GARCIA 04225
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GARCIA 04226
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GARCIA 04227
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GARCIA 04228
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GARCIA 04229
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GARCIA 04230
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GARCIA 04231
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GARCIA 04236
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GARCIA 04237
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GARCIA 04238
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GARCIA 04239
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GARCIA 04240
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GARCIA 04245
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GARCIA 04246
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GARCIA 04247
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GARCIA 04248
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GARCIA 04249
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GARCIA 04252
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GARCIA 04253
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GARCIA 04254
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GARCIA 04255
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GARCIA 04258
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GARCIA 04259
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GARCIA 04264
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GARCIA 04265
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GARCIA 04267
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GARCIA 04268
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GARCIA 04269
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GARCIA 04270
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GARCIA 04271
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GARCIA 04272
EXHIBIT A

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GARCIA 04273
Settlement Term Sheet

The provisions outlined below are intended to apply to loans secured by owner-occupied 

properties that serve as the primary residence of the borrower unless otherwise noted 

herein.

I. FORECLOSURE AND BANKRUPTCY INFORMATION AND DOCUMENTATION.

Unless otherwise specified, these provisions shall apply to bankruptcy and 

foreclosures in all jurisdictions regardless of whether the jurisdiction has a 

judicial, non-judicial or quasi-judicial process for foreclosures and regardless of 

whether a statement is submitted during the foreclosure or bankruptcy process in 

the form of an affidavit, sworn statement or declarations under penalty of perjury 

(to the extent stated to be based on personal knowledge) (“Declaration”).

A. Standards for Documents Used in Foreclosure and Bankruptcy 

Proceedings.

1. Servicer shall ensure that factual assertions made in pleadings

(complaint, counterclaim, cross-claim, answer or similar 

pleadings), bankruptcy proofs of claim (including any facts 

provided by Servicer or based on information provided by the 

Servicer that are included in any attachment and submitted to 

establish the truth of such facts) (“POC”), Declarations, affidavits, 

and sworn statements filed by or on behalf of Servicer in judicial 

foreclosures or bankruptcy proceedings and notices of default, 

notices of sale and similar notices submitted by or on behalf of 

Servicer in non-judicial foreclosures are accurate and complete and 

are supported by competent and reliable evidence. Before a loan is 

referred to non-judicial foreclosure, Servicer shall ensure that it has 

reviewed competent and reliable evidence to substantiate the 

borrower’s default and the right to foreclose, including the 

borrower’s loan status and loan information.

2. Servicer shall ensure that affidavits, sworn statements, and 

Declarations are based on personal knowledge, which may be 

based on the affiant’s review of Servicer’s books and records, in 

accordance with the evidentiary requirements of applicable state or 

federal law.

3. Servicer shall ensure that affidavits, sworn statements and 

Declarations executed by Servicer’s affiants are based on the 

affiant’s review and personal knowledge of the accuracy and 

completeness of the assertions in the affidavit, sworn statement or 

Declaration, set out facts that Servicer reasonably believes would 

be admissible in evidence, and show that the affiant is competent 

to testify on the matters stated. Affiants shall confirm that they 

have reviewed competent and reliable evidence to substantiate the 

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GARCIA 04274
A-2

borrower’s default and the right to foreclose, including the 

borrower’s loan status and required loan ownership information. If 

an affiant relies on a review of business records for the basis of its 

affidavit, the referenced business record shall be attached if

required by applicable state or federal law or court rule. This 

provision does not apply to affidavits, sworn statements and 

Declarations signed by counsel based solely on counsel’s personal 

knowledge (such as affidavits of counsel relating to service of

process, extensions of time, or fee petitions) that are not based on a 

review of Servicer’s books and records. Separate affidavits, sworn 

statements or Declarations shall be used when one affiant does not 

have requisite personal knowledge of all required information.

4. Servicer shall have standards for qualifications, training and 

supervision of employees. Servicer shall train and supervise 

employees who regularly prepare or execute affidavits, sworn 

statements or Declarations. Each such employee shall sign a 

certification that he or she has received the training. Servicer shall 

oversee the training completion to ensure each required employee 

properly and timely completes such training. Servicer shall 

maintain written records confirming that each such employee has 

completed the training and the subjects covered by the training.

5. Servicer shall review and approve standardized forms of affidavits, 

standardized forms of sworn statements, and standardized forms of 

Declarations prepared by or signed by an employee or officer of 

Servicer, or executed by a third party using a power of attorney on 

behalf of Servicer, to ensure compliance with applicable law, rules, 

court procedure, and the terms of this Agreement (“the 

Agreement”).

6. Affidavits, sworn statements and Declarations shall accurately 

identify the name of the affiant, the entity of which the affiant is an 

employee, and the affiant’s title.

7. Affidavits, sworn statements and Declarations, including their 

notarization, shall fully comply with all applicable state law 

requirements.

8. Affidavits, sworn statements and Declarations shall not contain 

information that is false or unsubstantiated. This requirement shall 

not preclude Declarations based on information and belief where 

so stated.

9. Servicer shall assess and ensure that it has an adequate number of 

employees and that employees have reasonable time to prepare, 

verify, and execute pleadings, POCs, motions for relief from stay 

(“MRS”), affidavits, sworn statements and Declarations.

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GARCIA 04275
A-3

10. Servicer shall not pay volume-based or other incentives to 

employees or third-party providers or trustees that encourage 

undue haste or lack of due diligence over quality.

11. Affiants shall be individuals, not entities, and affidavits, sworn 

statements and Declarations shall be signed by hand signature of 

the affiant (except for permitted electronic filings). For such 

documents, except for permitted electronic filings, signature 

stamps and any other means of electronic or mechanical signature 

are prohibited.

12. At the time of execution, all information required by a form 

affidavit, sworn statement or Declaration shall be complete.

13. Affiants shall date their signatures on affidavits, sworn statements 

or Declarations.

14. Servicer shall maintain records that identify all notarizations of 

Servicer documents executed by each notary employed by 

Servicer.

15. Servicer shall not file a POC in a bankruptcy proceeding which, 

when filed, contained materially inaccurate information. In cases 

in which such a POC may have been filed, Servicer shall not rely 

on such POC and shall (a) in active cases, at Servicer’s expense, 

take appropriate action, consistent with state and federal law and 

court procedure, to substitute such POC with an amended POC as 

promptly as reasonably practicable (and, in any event, not more 

than 30 days) after acquiring actual knowledge of such material 

inaccuracy and provide appropriate written notice to the borrower 

or borrower’s counsel; and (b) in other cases, at Servicer’s 

expense, take appropriate action after acquiring actual knowledge 

of such material inaccuracy.

16. Servicer shall not rely on an affidavit of indebtedness or similar 

affidavit, sworn statement or Declaration filed in a pending prejudgment judicial foreclosure or bankruptcy proceeding which (a) 

was required to be based on the affiant’s review and personal 

knowledge of its accuracy but was not, (b) was not, when so 

required, properly notarized, or (c) contained materially inaccurate 

information in order to obtain a judgment of foreclosure, order of 

sale, relief from the automatic stay or other relief in bankruptcy. In 

pending cases in which such affidavits, sworn statements or 

Declarations may have been filed, Servicer shall, at Servicer’s 

expense, take appropriate action, consistent with state and federal 

law and court procedure, to substitute such affidavits with new 

affidavits and provide appropriate written notice to the borrower or 

borrower’s counsel.

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17. In pending post-judgment, pre-sale cases in judicial foreclosure 

proceedings in which an affidavit or sworn statement was filed 

which was required to be based on the affiant’s review and 

personal knowledge of its accuracy but may not have been, or that 

may not have, when so required, been properly notarized, and such 

affidavit or sworn statement has not been re-filed, Servicer, unless 

prohibited by state or local law or court rule, will provide written 

notice to borrower at borrower’s address of record or borrower’s 

counsel prior to proceeding with a foreclosure sale or eviction 

proceeding.

18. In all states, Servicer shall send borrowers a statement setting forth 

facts supporting Servicer’s or holder’s right to foreclose and 

containing the information required in paragraphs I.B.6 (items 

available upon borrower request), I.B.10 (account statement), I.C.2

and I.C.3 (ownership statement), and IV.B.13 (loss mitigation 

statement) herein. Servicer shall send this statement to the 

borrower in one or more communications no later than 14 days 

prior to referral to foreclosure attorney or foreclosure trustee. 

Servicer shall provide the Monitoring Committee with copies of 

proposed form statements for review before implementation.

B. Requirements for Accuracy and Verification of Borrower’s Account 

Information.

1. Servicer shall maintain procedures to ensure accuracy and timely 

updating of borrower’s account information, including posting of 

payments and imposition of fees. Servicer shall also maintain 

adequate documentation of borrower account information, which 

may be in either electronic or paper format.

2. For any loan on which interest is calculated based on a daily 

accrual or daily interest method and as to which any obligor is not 

a debtor in a bankruptcy proceeding without reaffirmation, 

Servicer shall promptly accept and apply all borrower payments, 

including cure payments (where authorized by law or contract), 

trial modification payments, as well as non-conforming payments, 

unless such application conflicts with contract provisions or 

prevailing law. Servicer shall ensure that properly identified

payments shall be posted no more than two business days after 

receipt at the address specified by Servicer and credited as of the 

date received to borrower’s account. Each monthly payment shall 

be applied in the order specified in the loan documents.

3. For any loan on which interest is not calculated based on a daily 

accrual or daily interest method and as to which any obligor is not 

a debtor in a bankruptcy proceeding without reaffirmation, 

Servicer shall promptly accept and apply all borrower conforming 

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payments, including cure payments (where authorized by law or 

contract), unless such application conflicts with contract provisions 

or prevailing law. Servicer shall continue to accept trial 

modification payments consistent with existing payment 

application practices. Servicer shall ensure that properly identified 

payments shall be posted no more than two business days after

receipt at the address specified by Servicer. Each monthly 

payment shall be applied in the order specified in the loan 

documents.

a. Servicer shall accept and apply at least two non-conforming 

payments from the borrower, in accordance with this 

subparagraph, when the payment, whether on its own or 

when combined with a payment made by another source, 

comes within $50.00 of the scheduled payment, including 

principal and interest and, where applicable, taxes and 

insurance.

b. Except for payments described in paragraph I.B.3.a,

Servicer may post partial payments to a suspense or 

unapplied funds account, provided that Servicer (1) 

discloses to the borrower the existence of and any activity 

in the suspense or unapplied funds account; (2) credits the 

borrower’s account with a full payment as of the date that 

the funds in the suspense or unapplied funds account are 

sufficient to cover such full payment; and (3) applies 

payments as required by the terms of the loan documents.

Servicer shall not take funds from suspense or unapplied 

funds accounts to pay fees until all unpaid contractual 

interest, principal, and escrow amounts are paid and 

brought current or other final disposition of the loan.

4. Notwithstanding the provisions above, Servicer shall not be 

required to accept payments which are insufficient to pay the full 

balance due after the borrower has been provided written notice 

that the contract has been declared in default and the remaining 

payments due under the contract have been accelerated.

5. Servicer shall provide to borrowers (other than borrowers in 

bankruptcy or borrowers who have been referred to or are going 

through foreclosure) adequate information on monthly billing or 

other account statements to show in clear and conspicuous 

language:

a. total amount due;

b. allocation of payments, including a notation if any payment 

has been posted to a “suspense or unapplied funds 

account”;

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c. unpaid principal;

d. fees and charges for the relevant time period;

e. current escrow balance; and

f. reasons for any payment changes, including an interest rate 

or escrow account adjustment, no later than 21 days before 

the new amount is due (except in the case of loans as to 

which interest accrues daily or the rate changes more 

frequently than once every 30 days);

Statements as described above are not required to be delivered with 

respect to any fixed rate residential mortgage loan as to which the 

borrower is provided a coupon book.

6. In the statements described in paragraphs I.A.18 and III.B.1.a,

Servicer shall notify borrowers that they may receive, upon written

request:

a. A copy of the borrower’s payment history since the 

borrower was last less than 60 days past due;

b. A copy of the borrower’s note;

c. If Servicer has commenced foreclosure or filed a POC, 

copies of any assignments of mortgage or deed of trust 

required to demonstrate the right to foreclose on the 

borrower’s note under applicable state law; and

d. The name of the investor that holds the borrower’s loan.

7. Servicer shall adopt enhanced billing dispute procedures, including 

for disputes regarding fees. These procedures will include:

a. Establishing readily available methods for customers to 

lodge complaints and pose questions, such as by providing 

toll-free numbers and accepting disputes by email;

b. Assessing and ensuring adequate and competent staff to 

answer and respond to consumer disputes promptly;

c. Establishing a process for dispute escalation;

d. Tracking the resolution of complaints; and

e. Providing a toll-free number on monthly billing statements.

8. Servicer shall take appropriate action to promptly remediate any 

inaccuracies in borrowers’ account information, including:

a. Correcting the account information;

b. Providing cash refunds or account credits; and

c. Correcting inaccurate reports to consumer credit reporting 

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agencies.

9. Servicer’s systems to record account information shall be 

periodically independently reviewed for accuracy and 

completeness by an independent reviewer.

10. As indicated in paragraph I.A.18, Servicer shall send the borrower 

an itemized plain language account summary setting forth each of 

the following items, to the extent applicable:

a. The total amount needed to reinstate or bring the account 

current, and the amount of the principal obligation under 

the mortgage;

b. The date through which the borrower’s obligation is paid;

c. The date of the last full payment;

d. The current interest rate in effect for the loan (if the rate is 

effective for at least 30 days);

e. The date on which the interest rate may next reset or adjust 

(unless the rate changes more frequently than once every 

30 days);

f. The amount of any prepayment fee to be charged, if any;

g. A description of any late payment fees;

h. A telephone number or electronic mail address that may be 

used by the obligor to obtain information regarding the 

mortgage; and

i. The names, addresses, telephone numbers, and Internet 

addresses of one or more counseling agencies or programs 

approved by HUD 

(http://www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm).

11. In active chapter 13 cases, Servicer shall ensure that:

a. prompt and proper application of payments is made on 

account of (a) pre-petition arrearage amounts and (b) postpetition payment amounts and posting thereof as of the 

successful consummation of the effective confirmed plan;

b. the debtor is treated as being current so long as the debtor is 

making payments in accordance with the terms of the theneffective confirmed plan and any later effective payment 

change notices; and

c. as of the date of dismissal of a debtor’s bankruptcy case, 

entry of an order granting Servicer relief from the stay, or 

entry of an order granting the debtor a discharge, there is a 

reconciliation of payments received with respect to the 

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debtor’s obligations during the case and appropriately 

update the Servicer’s systems of record. In connection with 

such reconciliation, Servicer shall reflect the waiver of any 

fee, expense or charge pursuant to paragraphs III.B.1.c.i or 

III.B.1.d.

C. Documentation of Note, Holder Status and Chain of Assignment.

1. Servicer shall implement processes to ensure that Servicer or the 

foreclosing entity has a documented enforceable interest in the 

promissory note and mortgage (or deed of trust) under applicable 

state law, or is otherwise a proper party to the foreclosure action.

2. Servicer shall include a statement in a pleading, affidavit of 

indebtedness or similar affidavits in court foreclosure proceedings 

setting forth the basis for asserting that the foreclosing party has 

the right to foreclose.

3. Servicer shall set forth the information establishing the party’s 

right to foreclose as set forth in I.C.2 in a communication to be 

sent to the borrower as indicated in I.A.18.

4. If the original note is lost or otherwise unavailable, Servicer shall 

comply with applicable law in an attempt to establish ownership of 

the note and the right to enforcement. Servicer shall ensure good 

faith efforts to obtain or locate a note lost while in the possession 

of Servicer or Servicer’s agent and shall ensure that Servicer and 

Servicer’s agents who are expected to have possession of notes or 

assignments of mortgage on behalf of Servicer adopt procedures 

that are designed to provide assurance that the Servicer or 

Servicer’s agent would locate a note or assignment of mortgage if 

it is in the possession or control of the Servicer or Servicer’s agent, 

as the case may be. In the event that Servicer prepares or causes to 

be prepared a lost note or lost assignment affidavit with respect to 

an original note or assignment lost while in Servicer’s control, 

Servicer shall use good faith efforts to obtain or locate the note or 

assignment in accordance with its procedures. In the affidavit, 

sworn statement or other filing documenting the lost note or 

assignment, Servicer shall recite that Servicer has made a good 

faith effort in accordance with its procedures for locating the lost 

note or assignment.

5. Servicer shall not intentionally destroy or dispose of original notes 

that are still in force.

6. Servicer shall ensure that mortgage assignments executed by or on 

behalf of Servicer are executed with appropriate legal authority,

accurately reflective of the completed transaction and properly 

acknowledged.

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D. Bankruptcy Documents.

1. Proofs of Claim (“POC”). Servicer shall ensure that POCs filed 

on behalf of Servicer are documented in accordance with the 

United States Bankruptcy Code, the Federal Rules of Bankruptcy 

Procedure, and any applicable local rule or order (“bankruptcy 

law”). Unless not permitted by statute or rule, Servicer shall 

ensure that each POC is documented by attaching:

a. The original or a duplicate of the note, including all 

indorsements; a copy of any mortgage or deed of trust 

securing the notes (including, if applicable, evidence of 

recordation in the applicable land records); and copies of 

any assignments of mortgage or deed of trust required to 

demonstrate the right to foreclose on the borrower’s note 

under applicable state law (collectively, “Loan 

Documents”). If the note has been lost or destroyed, a lost 

note affidavit shall be submitted.

b. If, in addition to its principal amount, a claim includes 

interest, fees, expenses, or other charges incurred before the 

petition was filed, an itemized statement of the interest, 

fees, expenses, or charges shall be filed with the proof of 

claim (including any expenses or charges based on an 

escrow analysis as of the date of filing) at least in the detail 

specified in the current draft of Official Form B 10 

(effective December 2011) (“Official Form B 10”)

Attachment A.

c. A statement of the amount necessary to cure any default as 

of the date of the petition shall be filed with the proof of 

claim.

d. If a security interest is claimed in property that is the 

debtor’s principal residence, the attachment prescribed by 

the appropriate Official Form shall be filed with the proof 

of claim.

e. Servicer shall include a statement in a POC setting forth the 

basis for asserting that the applicable party has the right to

foreclose.

f. The POC shall be signed (either by hand or by appropriate 

electronic signature) by the responsible person under 

penalty of perjury after reasonable investigation, stating

that the information set forth in the POC is true and correct 

to the best of such responsible person’s knowledge, 

information, and reasonable belief, and clearly identify the 

responsible person’s employer and position or title with the 

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employer.

2. Motions for Relief from Stay (“MRS”). Unless not permitted by 

bankruptcy law, Servicer shall ensure that each MRS in a chapter 

13 proceeding is documented by attaching:

a. To the extent not previously submitted with a POC, a copy 

of the Loan Documents; if such documents were previously 

submitted with a POC, a statement to that effect. If the 

promissory note has been lost or destroyed, a lost note 

affidavit shall be submitted;

b. To the extent not previously submitted with a POC, 

Servicer shall include a statement in an MRS setting forth 

the basis for asserting that the applicable party has the right

to foreclose.

c. An affidavit, sworn statement or Declaration made by 

Servicer or based on information provided by Servicer 

(“MRS affidavit” (which term includes, without limitation, 

any facts provided by Servicer that are included in any 

attachment and submitted to establish the truth of such 

facts) setting forth:

i. whether there has been a default in paying prepetition arrearage or post-petition amounts (an 

“MRS delinquency”);

ii. if there has been such a default, (a) the unpaid 

principal balance, (b) a description of any default 

with respect to the pre-petition arrearage, (c) a

description of any default with respect to the postpetition amount (including, if applicable, any 

escrow shortage), (d) the amount of the pre-petition 

arrearage (if applicable), (e) the post-petition 

payment amount , (f) for the period since the date of 

the first post-petition or pre-petition default that is 

continuing and has not been cured, the date and 

amount of each payment made (including escrow 

payments) and the application of each such 

payment, and (g) the amount, date and description 

of each fee or charge applied to such pre-petition 

amount or post-petition amount since the later of the 

date of the petition or the preceding statement 

pursuant to paragraph III.B.1.a; and

iii. all amounts claimed, including a statement of the 

amount necessary to cure any default on or about 

the date of the MRS.

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d. All other attachments prescribed by statute, rule, or law.

e. Servicer shall ensure that any MRS discloses the terms of 

any trial period or permanent loan modification plan 

pending at the time of filing of a MRS or whether the 

debtor is being evaluated for a loss mitigation option.

E. Quality Assurance Systems Review.

1. Servicer shall conduct regular reviews, not less than quarterly, of a 

statistically valid sample of affidavits, sworn statements, 

Declarations filed by or on behalf of Servicer in judicial 

foreclosures or bankruptcy proceedings and notices of default, 

notices of sale and similar notices submitted in non-judicial 

foreclosures to ensure that the documents are accurate and comply 

with prevailing law and this Agreement.

a. The reviews shall also verify the accuracy of the statements 

in affidavits, sworn statements, Declarations and 

documents used to foreclose in non-judicial foreclosures, 

the account summary described in paragraph I.B.10, the 

ownership statement described in paragraph I.C.2, and the 

loss mitigation statement described in paragraph IV.B.13

by reviewing the underlying information. Servicer shall 

take appropriate remedial steps if deficiencies are 

identified, including appropriate remediation in individual 

cases.

b. The reviews shall also verify the accuracy of the statements 

in affidavits, sworn statements and Declarations submitted 

in bankruptcy proceedings. Servicer shall take appropriate 

remedial steps if deficiencies are identified, including 

appropriate remediation in individual cases.

2. The quality assurance steps set forth above shall be conducted by 

Servicer employees who are separate and independent of 

employees who prepare foreclosure or bankruptcy affidavits, 

sworn statements, or other foreclosure or bankruptcy documents.

3. Servicer shall conduct regular pre-filing reviews of a statistically 

valid sample of POCs to ensure that the POCs are accurate and 

comply with prevailing law and this Agreement. The reviews shall 

also verify the accuracy of the statements in POCs. Servicer shall 

take appropriate remedial steps if deficiencies are identified, 

including appropriate remediation in individual cases. The prefiling review shall be conducted by Servicer employees who are 

separate and independent of the persons who prepared the 

applicable POCs.

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4. Servicer shall regularly review and assess the adequacy of its 

internal controls and procedures with respect to its obligations 

under this Agreement, and implement appropriate procedures to 

address deficiencies.

II. THIRD-PARTY PROVIDER OVERSIGHT.

A. Oversight Duties Applicable to All Third-Party Providers.

Servicer shall adopt policies and processes to oversee and manage 

foreclosure firms, law firms, foreclosure trustees, subservicers and other 

agents, independent contractors, entities and third parties (including 

subsidiaries and affiliates) retained by or on behalf of Servicer that 

provide foreclosure, bankruptcy or mortgage servicing activities 

(including loss mitigation) (collectively, such activities are “Servicing 

Activities” and such providers are “Third-Party Providers”), including:

1. Servicer shall perform appropriate due diligence of Third-Party 

Providers’ qualifications, expertise, capacity, reputation, 

complaints, information security, document custody practices, 

business continuity, and financial viability.

2. Servicer shall amend agreements, engagement letters, or oversight 

policies, or enter into new agreements or engagement letters, with 

Third-Party Providers to require them to comply with Servicer’s 

applicable policies and procedures (which will incorporate any 

applicable aspects of this Agreement) and applicable state and 

federal laws and rules.

3. Servicer shall ensure that agreements, contracts or oversight 

policies provide for adequate oversight, including measures to 

enforce Third-Party Provider contractual obligations, and to ensure 

timely action with respect to Third-Party Provider performance 

failures.

4. Servicer shall ensure that foreclosure and bankruptcy counsel and 

foreclosure trustees have appropriate access to information from 

Servicer’s books and records necessary to perform their duties in 

preparing pleadings and other documents submitted in foreclosure 

and bankruptcy proceedings.

5. Servicer shall ensure that all information provided by or on behalf 

of Servicer to Third-Party Providers in connection with providing 

Servicing Activities is accurate and complete.

6. Servicer shall conduct periodic reviews of Third-Party Providers. 

These reviews shall include:

a. A review of a sample of the foreclosure and bankruptcy 

documents prepared by the Third-Party Provider, to provide 

for compliance with applicable state and federal law and 

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this Agreement in connection with the preparation of the 

documents, and the accuracy of the facts contained therein;

b. A review of the fees and costs assessed by the Third-Party 

Provider to provide that only fees and costs that are lawful, 

reasonable and actually incurred are charged to borrowers 

and that no portion of any fees or charges incurred by any 

Third-Party Provider for technology usage, connectivity, or 

electronic invoice submission is charged as a cost to the 

borrower;

c. A review of the Third-Party Provider’s processes to provide 

for compliance with the Servicer’s policies and procedures 

concerning Servicing Activities;

d. A review of the security of original loan documents 

maintained by the Third-Party Provider;

e. A requirement that the Third-Party Provider disclose to the 

Servicer any imposition of sanctions or professional 

disciplinary action taken against them for misconduct 

related to performance of Servicing Activities; and

f. An assessment of whether bankruptcy attorneys comply 

with the best practice of determining whether a borrower 

has made a payment curing any MRS delinquency within 

two business days of the scheduled hearing date of the 

related MRS.

The quality assurance steps set forth above shall be conducted by Servicer 

employees who are separate and independent of employees who prepare 

foreclosure or bankruptcy affidavits, sworn documents, Declarations or 

other foreclosure or bankruptcy documents.

7. Servicer shall take appropriate remedial steps if problems are 

identified through this review or otherwise, including, when 

appropriate, terminating its relationship with the Third-Party 

Provider.

8. Servicer shall adopt processes for reviewing and appropriately 

addressing customer complaints it receives about Third-Party 

Provider services.

9. Servicer shall regularly review and assess the adequacy of its 

internal controls and procedures with respect to its obligations 

under this Section, and take appropriate remedial steps if 

deficiencies are identified, including appropriate remediation in 

individual cases.

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B. Additional Oversight of Activities by Third-Party Providers.

1. Servicer shall require a certification process for law firms (and 

recertification of existing law firm providers) that provide 

residential mortgage foreclosure and bankruptcy services for 

Servicer, on a periodic basis, as qualified to serve as a Third-Party 

Provider to Servicer, including that attorneys have the experience 

and competence necessary to perform the services requested.

2. Servicer shall ensure that attorneys are licensed to practice in the 

relevant jurisdiction, have the experience and competence 

necessary to perform the services requested, and that their services 

comply with applicable rules, regulations and applicable law 

(including state law prohibitions on fee splitting).

3. Servicer shall ensure that foreclosure and bankruptcy counsel and 

foreclosure trustees have an appropriate Servicer contact to assist 

in legal proceedings and to facilitate loss mitigation questions on 

behalf of the borrower.

4. Servicer shall adopt policies requiring Third-Party Providers to 

maintain records that identify all notarizations of Servicer 

documents executed by each notary employed by the Third-Party 

Provider.

III. BANKRUPTCY.

A. General.

1. The provisions, conditions and obligations imposed herein are 

intended to be interpreted in accordance with applicable federal, 

state and local laws, rules and regulations. Nothing herein shall 

require a Servicer to do anything inconsistent with applicable state 

or federal law, including the applicable bankruptcy law or a court 

order in a bankruptcy case.

2. Servicer shall ensure that employees who are regularly engaged in 

servicing mortgage loans as to which the borrower or mortgagor is 

in bankruptcy receive training specifically addressing bankruptcy 

issues.

B. Chapter 13 Cases.

1. In any chapter 13 case, Servicer shall ensure that:

a. So long as the debtor is in a chapter 13 case, within 180 

days after the date on which the fees, expenses, or charges 

are incurred, file and serve on the debtor, debtor’s counsel, 

and the trustee a notice in a form consistent with Official 

Form B10 (Supplement 2) itemizing fees, expenses, or 

charges (1) that were incurred in connection with the claim 

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after the bankruptcy case was filed, (2) that the holder 

asserts are recoverable against the debtor or against the 

debtor’s principal residence, and (3) that the holder intends 

to collect from the debtor.

b. Servicer replies within time periods established under 

bankruptcy law to any notice that the debtor has completed 

all payments under the plan or otherwise paid in full the 

amount required to cure any pre-petition default.

c. If the Servicer fails to provide information as required by 

paragraph III.B.1.a with respect to a fee, expense or charge 

within 180 days of the incurrence of such fee, expense, or 

charge, then,

i. Except for independent charges (“Independent 

charge”) paid by the Servicer that is either (A) 

specifically authorized by the borrower or (B) 

consists of amounts advanced by Servicer in respect 

of taxes, homeowners association fees, liens or 

insurance, such fee, expense or charge shall be 

deemed waived and may not be collected from the 

borrower.

ii. In the case of an Independent charge, the court may, 

after notice and hearing, take either or both of the 

following actions:

(a) preclude the holder from presenting the 

omitted information, in any form, as 

evidence in any contested matter or 

adversary proceeding in the case, unless the 

court determines that the failure was 

substantially justified or is harmless; or

(b) award other appropriate relief, including 

reasonable expenses and attorney’s fees 

caused by the failure.

d. If the Servicer fails to provide information as required by 

paragraphs III.B.1.a or III.B.1.b and bankruptcy law with 

respect to a fee, expense or charge (other than an 

Independent Charge) incurred more than 45 days before the 

date of the reply referred to in paragraph III.B.1.b, then 

such fee, expense or charge shall be deemed waived and 

may not be collected from the borrower.

e. Servicer shall file and serve on the debtor, debtor’s counsel, 

and the trustee a notice in a form consistent with the current 

draft of Official Form B10 (Supplement 1) (effective 

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December 2011) of any change in the payment amount,

including any change that results from an interest rate or 

escrow account adjustment, no later than 21 days before a 

payment in the new amount is due. Servicer shall waive 

and not collect any late charge or other fees imposed solely 

as a result of the failure of the borrower timely to make a 

payment attributable to the failure of Servicer to give such 

notice timely.

IV. LOSS MITIGATION.

These requirements are intended to apply to both government-sponsored and 

proprietary loss mitigation programs and shall apply to subservicers performing 

loss mitigation services on Servicer’s behalf.

A. Loss Mitigation Requirements.

1. Servicer shall be required to notify potentially eligible borrowers 

of currently available loss mitigation options prior to foreclosure 

referral. Upon the timely receipt of a complete loan modification 

application, Servicer shall evaluate borrowers for all available loan 

modification options for which they are eligible prior to referring a 

borrower to foreclosure and shall facilitate the submission and 

review of loss mitigation applications. The foregoing 

notwithstanding, Servicer shall have no obligation to solicit 

borrowers who are in bankruptcy.

2. Servicer shall offer and facilitate loan modifications for borrowers 

rather than initiate foreclosure when such loan modifications for 

which they are eligible are net present value (NPV) positive and 

meet other investor, guarantor, insurer and program requirements.

3. Servicer shall allow borrowers enrolled in a trial period plan under 

prior HAMP guidelines (where borrowers were not pre-qualified) 

and who made all required trial period payments, but were later 

denied a permanent modification, the opportunity to reapply for a 

HAMP or proprietary loan modification using current financial 

information.

4. Servicer shall promptly send a final modification agreement to 

borrowers who have enrolled in a trial period plan under current 

HAMP guidelines (or fully underwritten proprietary modification 

programs with a trial payment period) and who have made the 

required number of timely trial period payments, where the 

modification is underwritten prior to the trial period and has 

received any necessary investor, guarantor or insurer approvals. 

The borrower shall then be converted by Servicer to a permanent 

modification upon execution of the final modification documents, 

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consistent with applicable program guidelines, absent evidence of 

fraud.

B. Dual Track Restricted.

1. If a borrower has not already been referred to foreclosure, Servicer 

shall not refer an eligible borrower’s account to foreclosure while 

the borrower’s complete application for any loan modification 

program is pending if Servicer received (a) a complete loan 

modification application no later than day 120 of delinquency, or 

(b) a substantially complete loan modification application (missing 

only any required documentation of hardship) no later than day 

120 of delinquency and Servicer receives any required hardship 

documentation no later than day 130 of delinquency. Servicer 

shall not make a referral to foreclosure of an eligible borrower who 

so provided an application until:

a. Servicer determines (after the automatic review in 

paragraph IV.G.1) that the borrower is not eligible for a 

loan modification, or

b. If borrower does not accept an offered foreclosure 

prevention alternative within 14 days of the evaluation 

notice, the earlier of (i) such 14 days, and (ii) borrower’s 

decline of the foreclosure prevention offer.

2. If borrower accepts the loan modification resulting from Servicer’s 

evaluation of the complete loan modification application referred 

to in paragraph IV.B.1 (verbally, in writing (including e-mail 

responses) or by submitting the first trial modification payment)

within 14 days of Servicer’s offer of a loan modification, then the 

Servicer shall delay referral to foreclosure until (a) if the Servicer 

fails timely to receive the first trial period payment, the last day for

timely receiving the first trial period payment, and (b) if the 

Servicer timely receives the first trial period payment, after the 

borrower breaches the trial plan.

3. If the loan modification requested by a borrower as described in 

paragraph IV.B.1 is denied, except when otherwise required by 

federal or state law or investor directives, if borrower is entitled to 

an appeal under paragraph IV.G.3, Servicer will not proceed to a 

foreclosure sale until the later of (if applicable):

a. expiration of the 30-day appeal period; and

b. if the borrower appeals the denial, until the later of (if 

applicable) (i) if Servicer denies borrower’s appeal, 15 days

after the letter denying the appeal, (ii) if the Servicer sends 

borrower a letter granting his or her appeal and offering a 

loan modification, 14 days after the date of such offer, (iii)

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if the borrower timely accepts the loan modification offer 

(verbally, in writing (including e-mail responses), or by 

making the first trial period payment), after the Servicer 

fails timely to receive the first trial period payment, and 

(iv) if the Servicer timely receives the first trial period 

payment, after the borrower breaches the trial plan.

4. If, after an eligible borrower has been referred to foreclosure, the 

Servicer receives a complete application from the borrower within 

30 days after the Post Referral to Foreclosure Solicitation Letter,

then while such loan modification application is pending, Servicer 

shall not move for foreclosure judgment or order of sale (or, if a 

motion has already been filed, shall take reasonable steps to avoid 

a ruling on such motion), or seek a foreclosure sale. If Servicer 

offers the borrower a loan modification, Servicer shall not move 

for judgment or order of sale, (or, if a motion has already been 

filed, shall take reasonable steps to avoid a ruling on such motion), 

or seek a foreclosure sale until the earlier of (a) 14 days after the 

date of the related offer of a loan modification, and (b) the date the 

borrower declines the loan modification offer. If the borrower 

accepts the loan modification offer (verbally, in writing (including 

e-mail responses) or by submitting the first trial modification 

payment) within 14 days after the date of the related offer of loan 

modification, Servicer shall continue this delay until the later of (if 

applicable) (A) the failure by the Servicer timely to receive the 

first trial period payment, and (B) if the Servicer timely receives 

the first trial period payment, after the borrower breaches the trial 

plan.

5. If the loan modification requested by a borrower described in 

paragraph IV.B.4 is denied, then, except when otherwise required 

by federal or state law or investor directives, if borrower is entitled 

to an appeal under paragraph IV.G.3, Servicer will not proceed to a 

foreclosure sale until the later of (if applicable):

a. expiration of the 30-day appeal period; and

b. if the borrower appeals the denial, until the later of (if 

applicable) (i) if Servicer denies borrower’s appeal, 15 days

after the letter denying the appeal, (ii) if the Servicer sends 

borrower a letter granting his or her appeal and offering a 

loan modification, 14 days after the date of such offer, (iii)

if the borrower timely accepts the loan modification offer 

(verbally, in writing (including e-mail responses), or by 

making the first trial period payment), after the failure of 

the Servicer timely to receive the first trial period payment, 

and (iv) if the Servicer timely receives the first trial period 

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payment, after the borrower breaches the trial plan.

6. If, after an eligible borrower has been referred to foreclosure, 

Servicer receives a complete loan modification application more 

than 30 days after the Post Referral to Foreclosure Solicitation 

Letter, but more than 37 days before a foreclosure sale is 

scheduled, then while such loan modification application is 

pending, Servicer shall not proceed with the foreclosure sale. If

Servicer offers a loan modification, then Servicer shall delay the 

foreclosure sale until the earlier of (i) 14 days after the date of the 

related offer of loan modification, and (ii) the date the borrower 

declines the loan modification offer. If the borrower accepts the 

loan modification offer (verbally, in writing (including e-mail 

responses) or by submitting the first trial modification payment)

within 14 days, Servicer shall delay the foreclosure sale until the 

later of (if applicable) (A) the failure by the Servicer timely to

receive the first trial period payment, and (B) if the Servicer timely 

receives the first trial period payment, after the borrower breaches

the trial plan.

7. If the loan modification requested by a borrower described in 

paragraph IV.B.6 is denied and it is reasonable to believe that more 

than 90 days remains until a scheduled foreclosure date or the first 

date on which a sale could reasonably be expected to be scheduled 

and occur, then, except when otherwise required by federal or state 

law or investor directives, if borrower is entitled to an appeal under 

paragraph IV.G.3.a, Servicer will not proceed to a foreclosure sale 

until the later of (if applicable):

a. expiration of the 30-day appeal period; and

b. if the borrower appeals the denial, until the later of (if 

applicable) (i) if Servicer denies borrower’s appeal, 15 days

after the letter denying the appeal, (ii) if the Servicer sends 

borrower a letter granting his or her appeal and offering a 

loan modification, 14 days after the date of such offer, (iii)

if the borrower timely accepts the loan modification offer 

(verbally, in writing (including e-mail responses), or by 

making the first trial period payment), after the Servicer 

fails timely to receive the first trial period payment, and 

(iv) if the Servicer timely receives the first trial period 

payment, after the borrower breaches the trial plan.

8. If, after an eligible borrower has been referred to foreclosure, 

Servicer receives a complete loan modification application more 

than 30 days after the Post Referral to Foreclosure Solicitation 

Letter, but within 37 to 15 days before a foreclosure sale is 

scheduled, then Servicer shall conduct an expedited review of the 

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borrower and, if the borrower is extended a loan modification 

offer, Servicer shall postpone any foreclosure sale until the earlier 

of (a) 14 days after the date of the related evaluation notice, and (b) 

the date the borrower declines the loan modification offer. If the 

borrower timely accepts the loan modification offer (either in 

writing or by submitting the first trial modification payment), 

Servicer shall delay the foreclosure sale until the later of (if 

applicable) (A) the failure by the Servicer timely to receive the 

first trial period payment, and (B) if the Servicer timely receives 

the first trial period payment, after the borrower breaches the trial 

plan.

9. If, after an eligible borrower has been referred to foreclosure, the 

Servicer receives a complete loan modification application more 

than 30 days after the Post Referral to Foreclosure Solicitation 

Letter and less than 15 days before a scheduled foreclosure sale, 

Servicer must notify the borrower before the foreclosure sale date 

as to Servicer’s determination (if its review was completed) or 

inability to complete its review of the loan modification 

application. If Servicer makes a loan modification offer to the 

borrower, then Servicer shall postpone any sale until the earlier of

(a) 14 days after the date of the related evaluation notice, and (b) 

the date the borrower declines the loan modification offer. If the 

borrower timely accepts a loan modification offer (either in writing 

or by submitting the first trial modification payment), Servicer 

shall delay the foreclosure sale until the later of (if applicable) (A) 

the failure by the Servicer timely to receive the first trial period 

payment, and (B) if the Servicer timely receives the first trial 

period payment, after the borrower breaches the trial plan.

10. For purposes of this section IV.B, Servicer shall not be responsible 

for failing to obtain a delay in a ruling on a judgment or failing to 

delay a foreclosure sale if Servicer made a request for such delay, 

pursuant to any state or local law, court rule or customary practice, 

and such request was not approved.

11. Servicer shall not move to judgment or order of sale or proceed 

with a foreclosure sale under any of the following circumstances:

a. The borrower is in compliance with the terms of a trial loan 

modification, forbearance, or repayment plan; or

b. A short sale or deed-in-lieu of foreclosure has been 

approved by all parties (including, for example, first lien 

investor, junior lien holder and mortgage insurer, as 

applicable), and proof of funds or financing has been 

provided to Servicer.

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12. If a foreclosure or trustee’s sale is continued (rather than cancelled) 

to provide time to evaluate loss mitigation options, Servicer shall 

promptly notify borrower in writing of the new date of sale

(without delaying any related foreclosure sale).

13. As indicated in paragraph I.A.18, Servicer shall send a statement to 

the borrower outlining loss mitigation efforts undertaken with 

respect to the borrower prior to foreclosure referral. If no loss 

mitigation efforts were offered or undertaken, Servicer shall state 

whether it contacted or attempted to contact the borrower and, if 

applicable, why the borrower was ineligible for a loan modification 

or other loss mitigation options.

14. Servicer shall ensure timely and accurate communication of or 

access to relevant loss mitigation status and changes in status to its 

foreclosure attorneys, bankruptcy attorneys and foreclosure 

trustees and, where applicable, to court-mandated mediators.

C. Single Point of Contact.

1. Servicer shall establish an easily accessible and reliable single 

point of contact (“SPOC”) for each potentially-eligible first lien 

mortgage borrower so that the borrower has access to an employee 

of Servicer to obtain information throughout the loss mitigation, 

loan modification and foreclosure processes.

2. Servicer shall initially identify the SPOC to the borrower promptly 

after a potentially-eligible borrower requests loss mitigation 

assistance. Servicer shall provide one or more direct means of 

communication with the SPOC on loss mitigation-related 

correspondence with the borrower. Servicer shall promptly 

provide updated contact information to the borrower if the 

designated SPOC is reassigned, no longer employed by Servicer, 

or otherwise not able to act as the primary point of contact.

a. Servicer shall ensure that debtors in bankruptcy are 

assigned to a SPOC specially trained in bankruptcy issues.

3. The SPOC shall have primary responsibility for:

a. Communicating the options available to the borrower, the 

actions the borrower must take to be considered for these 

options and the status of Servicer’s evaluation of the 

borrower for these options;

b. Coordinating receipt of all documents associated with loan 

modification or loss mitigation activities;

c. Being knowledgeable about the borrower’s situation and 

current status in the delinquency/imminent default 

resolution process; and

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d. Ensuring that a borrower who is not eligible for MHA 

programs is considered for proprietary or other investor 

loss mitigation options.

4. The SPOC shall, at a minimum, provide the following services to 

borrowers:

a. Contact borrower and introduce himself/herself as the 

borrower’s SPOC;

b. Explain programs for which the borrower is eligible;

c. Explain the requirements of the programs for which the 

borrower is eligible;

d. Explain program documentation requirements;

e. Provide basic information about the status of borrower’s 

account, including pending loan modification applications, 

other loss mitigation alternatives, and foreclosure activity;

f. Notify borrower of missing documents and provide an 

address or electronic means for submission of documents 

by borrower in order to complete the loan modification 

application;

g. Communicate Servicer’s decision regarding loan 

modification applications and other loss mitigation 

alternatives to borrower in writing;

h. Assist the borrower in pursuing alternative non-foreclosure 

options upon denial of a loan modification;

i. If a loan modification is approved, call borrower to explain 

the program;

j. Provide information regarding credit counseling where 

necessary;

k. Help to clear for borrower any internal processing 

requirements; and

l. Have access to individuals with the ability to stop 

foreclosure proceedings when necessary to comply with the 

MHA Program or this Agreement.

5. The SPOC shall remain assigned to borrower’s account and 

available to borrower until such time as Servicer determines in 

good faith that all loss mitigation options have been exhausted, 

borrower’s account becomes current or, in the case of a borrower 

in bankruptcy, the borrower has exhausted all loss mitigation 

options for which the borrower is potentially eligible and has 

applied.

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6. Servicer shall ensure that a SPOC can refer and transfer a borrower 

to an appropriate supervisor upon request of the borrower.

7. Servicer shall ensure that relevant records relating to borrower’s 

account are promptly available to the borrower’s SPOC, so that the 

SPOC can timely, adequately and accurately inform the borrower 

of the current status of loss mitigation, loan modification, and 

foreclosure activities.

8. Servicer shall designate one or more management level employees 

to be the primary contact for the Attorneys General, state financial 

regulators, the Executive Office of U.S. Trustee, each regional 

office of the U.S. Trustee, and federal regulators for 

communication regarding complaints and inquiries from individual 

borrowers who are in default and/or have applied for loan 

modifications. Servicer shall provide a written acknowledgment to 

all such inquiries within 10 business days. Servicer shall provide a 

substantive written response to all such inquiries within 30 days. 

Servicer shall provide relevant loan information to borrower and to 

Attorneys General, state financial regulators, federal regulators, the 

Executive Office of the U.S. Trustee, and each U.S. Trustee upon

written request and if properly authorized. A written complaint 

filed by a borrower and forwarded by a state attorney general or 

financial regulatory agency to Servicer shall be deemed to have 

proper authorization.

9. Servicer shall establish and make available to Chapter 13 trustees a 

toll-free number staffed by persons trained in bankruptcy to 

respond to inquiries from Chapter 13 trustees.

D. Loss Mitigation Communications with Borrowers.

1. Servicer shall commence outreach efforts to communicate loss 

mitigation options for first lien mortgage loans to all potentially 

eligible delinquent borrowers (other than those in bankruptcy) 

beginning on timelines that are in accordance with HAMP 

borrower solicitation guidelines set forth in the MHA Handbook 

version 3.2, Chapter II, Section 2.2, regardless of whether the 

borrower is eligible for a HAMP modification. Servicer shall 

provide borrowers with notices that include contact information for 

national or state foreclosure assistance hotlines and state housing 

counseling resources, as appropriate. The use by Servicer of 

nothing more than prerecorded automatic messages in loss 

mitigation communications with borrowers shall not be sufficient 

in those instances in which it fails to result in contact between the 

borrower and one of Servicer’s loss mitigation specialists. 

Servicer shall conduct affirmative outreach efforts to inform 

delinquent second lien borrowers (other than those in bankruptcy) 

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about the availability of payment reduction options. The foregoing 

notwithstanding, Servicer shall have no obligation to solicit 

borrowers who are in bankruptcy.

2. Servicer shall disclose and provide accurate information to 

borrowers relating to the qualification process and eligibility 

factors for loss mitigation programs.

3. Servicer shall communicate, at the written request of the borrower, 

with the borrower’s authorized representatives, including housing 

counselors. Servicer shall communicate with representatives from 

state attorneys general and financial regulatory agencies acting 

upon a written complaint filed by the borrower and forwarded by 

the state attorney general or financial regulatory agency to 

Servicer. When responding to the borrower regarding such 

complaint, Servicer shall include the applicable state attorney 

general on all correspondence with the borrower regarding such 

complaint.

4. Servicer shall cease all collection efforts while the borrower (i) is 

making timely payments under a trial loan modification or (ii) has 

submitted a complete loan modification application, and a 

modification decision is pending. Notwithstanding the above, 

Servicer reserves the right to contact a borrower to gather required 

loss mitigation documentation or to assist a borrower with 

performance under a trial loan modification plan.

5. Servicer shall consider partnering with third parties, including 

national chain retailers, and shall consider the use of select bank 

branches affiliated with Servicer, to set up programs to allow 

borrowers to copy, fax, scan, transmit by overnight delivery, or 

mail or email documents to Servicer free of charge.

6. Within five business days after referral to foreclosure, the Servicer 

(including any attorney (or trustee) conducting foreclosure 

proceedings at the direction of the Servicer) shall send a written 

communication (“Post Referral to Foreclosure Solicitation Letter”)

to the borrower that includes clear language that:

a. The Servicer may have sent to the borrower one or more 

borrower solicitation communications;

b. The borrower can still be evaluated for alternatives to 

foreclosure even if he or she had previously shown no 

interest;

c. The borrower should contact the Servicer to obtain a loss 

mitigation application package;

d. The borrower must submit a loan modification application 

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to the Servicer to request consideration for available 

foreclosure prevention alternatives;

e. Provides the Servicer’s contact information for submitting 

a complete loan modification application, including the 

Servicer’s toll-free number; and

f. Unless the form of letter is otherwise specified by investor 

directive or state law or the borrower is not eligible for an 

appeal under paragraph IV.G.3.a, states that if the borrower 

is contemplating or has pending an appeal of an earlier 

denial of a loan modification application, that he or she 

may submit a loan modification application in lieu of his or 

her appeal within 30 days after the Post Referral to 

Foreclosure Solicitation Letter.

E. Development of Loan Portals.

1. Servicer shall develop or contract with a third-party vendor to 

develop an online portal linked to Servicer’s primary servicing 

system where borrowers can check, at no cost, the status of their 

first lien loan modifications. 

2. Servicer shall design portals that may, among other things:

a. Enable borrowers to submit documents electronically;

b. Provide an electronic receipt for any documents submitted;

c. Provide information and eligibility factors for proprietary 

loan modification and other loss mitigation programs; and

d. Permit Servicer to communicate with borrowers to satisfy 

any written communications required to be provided by 

Servicer, if borrowers submit documents electronically.

3. Servicer shall participate in the development and implementation 

of a neutral, nationwide loan portal system linked to Servicer’s

primary servicing system, such as Hope LoanPort to enhance 

communications with housing counselors, including using the 

technology used for the Borrower Portal, and containing similar 

features to the Borrower Portal.

4. Servicer shall update the status of each pending loan modification 

on these portals at least every 10 business days and ensure that 

each portal is updated on such a schedule as to maintain 

consistency.

F. Loan Modification Timelines.

1. Servicer shall provide written acknowledgement of the receipt of 

documentation submitted by the borrower in connection with a 

first lien loan modification application within 3 business days. In 

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its initial acknowledgment, Servicer shall briefly describe the loan 

modification process and identify deadlines and expiration dates 

for submitted documents.

2. Servicer shall notify borrower of any known deficiency in 

borrower’s initial submission of information, no later than 5 

business days after receipt, including any missing information or 

documentation required for the loan modification to be considered 

complete.

3. Subject to section IV.B, Servicer shall afford borrower 30 days 

from the date of Servicer’s notification of any missing information 

or documentation to supplement borrower’s submission of 

information prior to making a determination on whether or not to 

grant an initial loan modification.

4. Servicer shall review the complete first lien loan modification

application submitted by borrower and shall determine the 

disposition of borrower’s trial or preliminary loan modification 

request no later than 30 days after receipt of the complete loan 

modification application, absent compelling circumstances beyond 

Servicer’s control.

5. Servicer shall implement processes to ensure that second lien loan 

modification requests are evaluated on a timely basis. When a 

borrower qualifies for a second lien loan modification after a first 

lien loan modification in accordance with Section 2.c.i of the 

General Framework for Consumer Relief Provisions, the Servicer

of the second lien loan shall (absent compelling circumstances 

beyond Servicer’s control) send loan modification documents to 

borrower no later than 45 days after the Servicer receives official 

notification of the successful completion of the related first lien 

loan modification and the essential terms.

6. For all proprietary first lien loan modification programs, Servicer 

shall allow properly submitted borrower financials to be used for 

90 days from the date the documents are received, unless Servicer 

learns that there has been a material change in circumstances or 

unless investor requirements mandate a shorter time frame.

7. Servicer shall notify borrowers of the final denial of any first lien 

loan modification request within 10 business days of the denial 

decision. The notification shall be in the form of the non-approval 

notice required in paragraph IV.G.1 below.

G. Independent Evaluation of First Lien Loan Modification Denials.

1. Except when evaluated as provided in paragraphs IV.B.8 or 

IV.B.9, Servicer’s initial denial of an eligible borrower’s request 

for first lien loan modification following the submission of a 

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complete loan modification application shall be subject to an 

independent evaluation. Such evaluation shall be performed by an 

independent entity or a different employee who has not been 

involved with the particular loan modification.

2. Denial Notice.

a. When a first lien loan modification is denied after 

independent review, Servicer shall send a written nonapproval notice to the borrower identifying the reasons for 

denial and the factual information considered. The notice 

shall inform the borrower that he or she has 30 days from 

the date of the denial letter declination to provide evidence 

that the eligibility determination was in error.

b. If the first lien modification is denied because disallowed 

by investor, Servicer shall disclose in the written nonapproval notice the name of the investor and summarize the 

reasons for investor denial.

c. For those cases where a first lien loan modification denial 

is the result of an NPV calculation, Servicer shall provide 

in the written non-approval notice the monthly gross

income and property value used in the calculation.

3. Appeal Process.

a. After the automatic review in paragraph IV.G.1 has been 

completed and Servicer has issued the written non-approval 

notice, in the circumstances described in the first sentences 

of paragraphs IV.B.3, IV.B.5 or IV.B.7,except when 

otherwise required by federal or state law or investor 

directives, borrowers shall have 30 days to request an 

appeal and obtain an independent review of the first lien

loan modification denial in accordance with the terms of 

this Agreement. Servicer shall ensure that the borrower has 

30 days from the date of the written non-approval notice to 

provide information as to why Servicer’s determination of 

eligibility for a loan modification was in error, unless the 

reason for non-approval is (1) ineligible mortgage, (2) 

ineligible property, (3) offer not accepted by borrower or

request withdrawn, or (4) the loan was previously modified.

b. For those cases in which the first lien loan modification

denial is the result of an NPV calculation, if a borrower 

disagrees with the property value used by Servicer in the 

NPV test, the borrower can request that a full appraisal be 

conducted of the property by an independent licensed 

appraiser (at borrower expense) consistent with HAMP 

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directive 10-15. Servicer shall comply with the process set 

forth in HAMP directive 10-15, including using such value 

in the NPV calculation.

c. Servicer shall review the information submitted by 

borrower and use its best efforts to communicate the 

disposition of borrower’s appeal to borrower no later than 

30 days after receipt of the information.

d. If Servicer denies borrower’s appeal, Servicer’s appeal 

denial letter shall include a description of other available 

loss mitigation, including short sales and deeds in lieu of 

foreclosure.

H. General Loss Mitigation Requirements.

1. Servicer shall maintain adequate staffing and systems for tracking 

borrower documents and information that are relevant to 

foreclosure, loss mitigation, and other Servicer operations. 

Servicer shall make periodic assessments to ensure that its staffing 

and systems are adequate.

2. Servicer shall maintain adequate staffing and caseload limits for 

SPOCs and employees responsible for handling foreclosure, loss 

mitigation and related communications with borrowers and 

housing counselors. Servicer shall make periodic assessments to 

ensure that its staffing and systems are adequate.

3. Servicer shall establish reasonable minimum experience, 

educational and training requirements for loss mitigation staff.

4. Servicer shall document electronically key actions taken on a 

foreclosure, loan modification, bankruptcy, or other servicing file, 

including communications with the borrower.

5. Servicer shall not adopt compensation arrangements for its 

employees that encourage foreclosure over loss mitigation 

alternatives.

6. Servicer shall not make inaccurate payment delinquency reports to 

credit reporting agencies when the borrower is making timely 

reduced payments pursuant to a trial or other loan modification 

agreement. Servicer shall provide the borrower, prior to entering 

into a trial loan modification, with clear and conspicuous written 

information that adverse credit reporting consequences may result 

from the borrower making reduced payments during the trial 

period.

7. Where Servicer grants a loan modification, Servicer shall provide 

borrower with a copy of the fully executed loan modification 

agreement within 45 days of receipt of the executed copy from the 

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borrower. If the modification is not in writing, Servicer shall 

provide the borrower with a written summary of its terms, as 

promptly as possible, within 45 days of the approval of the 

modification.

8. Servicer shall not instruct, advise or recommend that borrowers go 

into default in order to qualify for loss mitigation relief.

9. Servicer shall not discourage borrowers from working or 

communicating with legitimate non-profit housing counseling 

services.

10. Servicer shall not, in the ordinary course, require a borrower to 

waive or release claims and defenses as a condition of approval for 

a loan modification program or other loss mitigation relief. 

However, nothing herein shall preclude Servicer from requiring a 

waiver or release of claims and defenses with respect to a loan 

modification offered in connection with the resolution of a 

contested claim, when the borrower would not otherwise be 

qualified for the loan modification under existing Servicer 

programs.

11. Servicer shall not charge borrower an application fee in connection 

with a request for a loan modification. Servicer shall provide 

borrower with a pre-paid overnight envelope or pre-paid address 

label for return of a loan modification application.

12. Notwithstanding any other provision of this Agreement, and to 

minimize the risk of borrowers submitting multiple loss mitigation 

requests for the purpose of delay, Servicer shall not be obligated to 

evaluate requests for loss mitigation options from (a) borrowers 

who have already been evaluated or afforded a fair opportunity to 

be evaluated consistent with the requirements of HAMP or 

proprietary modification programs, or (b) borrowers who were 

evaluated after the date of implementation of this Agreement, 

consistent with this Agreement, unless there has been a material 

change in the borrower’s financial circumstances that is 

documented by borrower and submitted to Servicer.

I. Proprietary First Lien Loan Modifications.

1. Servicer shall make publicly available information on its 

qualification processes, all required documentation and 

information necessary for a complete first lien loan modification 

application, and key eligibility factors for all proprietary loan 

modifications.

2. Servicer shall design proprietary first lien loan modification 

programs that are intended to produce sustainable modifications 

according to investor guidelines and previous results. Servicer 

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shall design these programs with the intent of providing affordable 

payments for borrowers needing longer term or permanent 

assistance.

3. Servicer shall track outcomes and maintain records regarding 

characteristics and performance of proprietary first lien loan 

modifications. Servicer shall provide a description of modification 

waterfalls, eligibility criteria, and modification terms, on a 

publicly-available website.

4. Servicer shall not charge any application or processing fees for 

proprietary first lien loan modifications.

J. Proprietary Second Lien Loan Modifications.

1. Servicer shall make publicly available information on its 

qualification processes, all required documentation and 

information necessary for a complete second lien modification 

application.

2. Servicer shall design second lien modification programs with the 

intent of providing affordable payments for borrowers needing 

longer term or permanent assistance.

3. Servicer shall not charge any application or processing fees for 

second lien modifications.

4. When an eligible borrower with a second lien submits all required 

information for a second lien loan modification and the 

modification request is denied, Servicer shall promptly send a 

written non-approval notice to the borrower.

K. Short Sales.

1. Servicer shall make publicly available information on general 

requirements for the short sale process.

2. Servicer shall consider appropriate monetary incentives to

underwater borrowers to facilitate short sale options.

3. Servicer shall develop a cooperative short sale process which 

allows the borrower the opportunity to engage with Servicer to 

pursue a short sale evaluation prior to putting home on the market.

4. Servicer shall send written confirmation of the borrower’s first 

request for a short sale to the borrower or his or her agent within 

10 business days of receipt of the request and proper written 

authorization from the borrower allowing Servicer to communicate 

with the borrower’s agent. The confirmation shall include basic 

information about the short sale process and Servicer’s 

requirements, and will state clearly and conspicuously that the 

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Servicer may demand a deficiency payment if such deficiency 

claim is permitted by applicable law.

5. Servicer shall send borrower at borrower’s address of record or to 

borrower’s agent timely written notice of any missing required 

documents for consideration of short sale within 30 days of 

receiving borrower’s request for a short sale.

6. Servicer shall review the short sale request submitted by borrower 

and communicate the disposition of borrower’s request no later 

than 30 days after receipt of all required information and thirdparty consents.

7. If the short sale request is accepted, Servicer shall 

contemporaneously notify the borrower whether Servicer or 

investor will demand a deficiency payment or related cash 

contribution and the approximate amount of that deficiency, if such 

deficiency obligation is permitted by applicable law. If the short 

sale request is denied, Servicer shall provide reasons for the denial 

in the written notice. If Servicer waives a deficiency claim, it shall 

not sell or transfer such claim to a third-party debt collector or debt 

buyer for collection.

L. Loss Mitigation During Bankruptcy.

1. Servicer may not deny any loss mitigation option to eligible 

borrowers on the basis that the borrower is a debtor in bankruptcy 

so long as borrower and any trustee cooperates in obtaining any 

appropriate approvals or consents.

2. Servicer shall, to the extent reasonable, extend trial period loan 

modification plans as necessary to accommodate delays in 

obtaining bankruptcy court approvals or receiving full remittance 

of debtor’s trial period payments that have been made to a chapter 

13 trustee. In the event of a trial period extension, the debtor must 

make a trial period payment for each month of the trial period, 

including any extension month.

3. When the debtor is in compliance with a trial period or permanent 

loan modification plan, Servicer will not object to confirmation of 

the debtor’s chapter 13 plan, move to dismiss the pending 

bankruptcy case, or file a MRS solely on the basis that the debtor 

paid only the amounts due under the trial period or permanent loan 

modification plan, as opposed to the non-modified mortgage 

payments.

M. Transfer of Servicing of Loans Pending for Permanent Loan Modification.

1. Ordinary Transfer of Servicing from Servicer to Successor 

Servicer or Subservicer.

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a. At time of transfer or sale, Servicer shall inform successor 

servicer (including a subservicer) whether a loan 

modification is pending.

b. Any contract for the transfer or sale of servicing rights shall 

obligate the successor servicer to accept and continue 

processing pending loan modification requests.

c. Any contract for the transfer or sale of servicing rights shall 

obligate the successor servicer to honor trial and permanent 

loan modification agreements entered into by prior servicer.

d. Any contract for transfer or sale of servicing rights shall 

designate that borrowers are third party beneficiaries under 

paragraphs IV.M.1.b and IV.M.1.c, above.

2. Transfer of Servicing to Servicer. When Servicer acquires 

servicing rights from another servicer, Servicer shall ensure that it 

will accept and continue to process pending loan modification 

requests from the prior servicer, and that it will honor trial and 

permanent loan modification agreements entered into by the prior 

servicer.

V. PROTECTIONS FOR MILITARY PERSONNEL.

A. Servicer shall comply with all applicable provisions of the 

Servicemembers Civil Relief Act (SCRA), 50 U.S.C. Appx. § 501 et seq., 

and any applicable state law offering protections to servicemembers, and 

shall engage an independent consultant whose duties shall include a 

review of (a) all foreclosures in which an SCRA-eligible servicemember is 

known to have been an obligor or mortgagor, and (b) a sample of 

foreclosure actions (which sample will be appropriately enlarged to the 

extent Servicer identifies material exceptions), from January 1, 2009 to 

December 31, 2010 to determine whether the foreclosures were in 

compliance with the SCRA. Servicer shall remediate all monetary 

damages in compliance with the banking regulator Consent Orders.

B. When a borrower states that he or she is or was within the preceding 9 

months (or the then applicable statutory period under the SCRA) in active 

military service or has received and is subject to military orders requiring 

him or her to commence active military service, Lender shall determine 

whether the borrower may be eligible for the protections of the SCRA or 

for the protections of the provisions of paragraph V.F. If Servicer 

determines the borrower is so eligible, Servicer shall, until Servicer

determines that such customer is no longer protected by the SCRA,

1. if such borrower is not entitled to a SPOC, route such customers to 

employees who have been specially trained about the protections 

of the SCRA to respond to such borrower’s questions, or

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2. if such borrower is entitled to a SPOC, designate as a SPOC for 

such borrower a person who has been specially trained about the 

protections of the SCRA (Servicemember SPOC).

C. Servicer shall, in addition to any other reviews it may perform to assess 

eligibility under the SCRA, (i) before referring a loan for foreclosure, (ii)

within seven days before a foreclosure sale, and (iii) the later of (A) 

promptly after a foreclosure sale and (B) within three days before the 

regularly scheduled end of any redemption period, determine whether the 

secured property is owned by a servicemember covered under SCRA by 

searching the Defense Manpower Data Center (DMDC) for evidence of 

SCRA eligibility by either (a) last name and social security number, or (b) 

last name and date of birth.

D. When a servicemember provides written notice requesting protection 

under the SCRA relating to interest rate relief, but does not provide the 

documentation required by Section 207(b)(1) of the SCRA (50 USC 

Appx. § 527(b)(1)), Servicer shall accept, in lieu of the documentation 

required by Section 207(b)(1) of the SCRA, a letter on official letterhead

from the servicemember’s commanding officer including a contact 

telephone number for confirmation:

1. Addressed in such a way as to signify that the commanding officer 

recognizes that the letter will be relied on by creditors of the 

servicemember (a statement that the letter is intended to be relied 

upon by the Servicemember’s creditors would satisfy this 

requirement);

2. Setting forth the full name (including middle initial, if any), Social 

Security number and date of birth of the servicemember;

3. Setting forth the home address of the servicemember; and

4. Setting forth the date of the military orders marking the beginning 

of the period of military service of the servicemember and, as may 

be applicable, that the military service of the servicemember is 

continuing or the date on which the military service of the 

servicemember ended.

E. Servicer shall notify customers who are 45 days delinquent that, if they are 

a servicemember, (a) they may be entitled to certain protections under the 

SCRA regarding the servicemember’s interest rate and the risk of 

foreclosure, and (b) counseling for covered servicemembers is available at 

agencies such as Military OneSource, Armed Forces Legal Assistance, 

and a HUD-certified housing counselor. Such notice shall include a tollfree number that servicemembers may call to be connected to a person

who has been specially trained about the protections of the SCRA to 

respond to such borrower’s questions. Such telephone number shall either 

connect directly to such a person or afford a caller the ability to identify 

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him- or herself as an eligible servicemember and be routed to such 

persons. Servicers hereby confirm that they intend to take reasonable 

steps to ensure the dissemination of such toll-free number to customers 

who may be eligible servicemembers.

F. Irrespective of whether a mortgage obligation was originated before or 

during the period of a servicemember’s military service, if, based on the 

determination described in the last sentence and subject to Applicable 

Requirements, a servicemember’s military orders (or any letter complying 

with paragraph V.D), together with any other documentation satisfactory 

to the Servicer, reflects that the servicemember is (a) eligible for Hostile 

Fire/Imminent Danger Pay and (b) serving at a location (i) more than 750 

miles from the location of the secured property or (ii) outside of the 

United States, then to the extent consistent with Applicable Requirements, 

the Servicer shall not sell, foreclose, or seize a property for a breach of an 

obligation on real property owned by a servicemember that is secured by 

mortgage, deed of trust, or other security in the nature of a mortgage,

during, or within 9 months after, the period in which the servicemember is 

eligible for Hostile Fire/Imminent Danger Pay, unless either (i) Servicer 

has obtained a court order granted before such sale, foreclosure, or seizure 

with a return made and approved by the court, or (ii) if made pursuant to 

an agreement as provided in section 107 of the SCRA (50 U.S.C. Appx. § 

517). Unless a servicemember's eligibility for the protection under this 

paragraph can be fully determined by a proper search of the DMDC 

website, Servicer shall only be obligated under this provision if it is able to 

determine, based on a servicemember’s military orders (or any letter 

complying with paragraph V.D), together with any other documentation 

provided by or on behalf of the servicemember that is satisfactory to the 

Servicer, that the servicemember is (a) eligible for Hostile Fire/Imminent 

Danger Pay and (b) serving at a location (i) more than 750 miles from the 

location of the secured property or (ii) outside of the United States.

G. Servicer shall not require a servicemember to be delinquent to qualify for 

a short sale, loan modification, or other loss mitigation relief if the 

servicemember is suffering financial hardship and is otherwise eligible for 

such loss mitigation. Subject to Applicable Requirements, for purposes of 

assessing financial hardship in relation to (i) a short sale or deed in lieu 

transaction, Servicer will take into account whether the servicemember is, 

as a result of a permanent change of station order, required to relocate

even if such servicemember’s income has not been decreased, so long as 

the servicemember does not have sufficient liquid assets to make his or her 

monthly mortgage payments, or (ii) a loan modification, Servicer will take 

into account whether the servicemember is, as a result of his or her under 

military orders required to relocate to a new duty station at least seventy 

five mile from his or her residence/secured property or to reside at a 

location other than the residence/secured property, and accordingly is 

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unable personally to occupy the residence and (a) the residence will 

continue to be occupied by his or her dependents, or (b) the residence is 

the only residential property owned by the servicemember.

H. Servicer shall not make inaccurate reports to credit reporting agencies 

when a servicemember, who has not defaulted before relocating under 

military orders to a new duty station, obtains a short sale, loan 

modification, or other loss mitigation relief.

VI. RESTRICTIONS ON SERVICING FEES.

A. General Requirements.

1. All default, foreclosure and bankruptcy-related service fees, 

including third-party fees, collected from the borrower by Servicer 

shall be bona fide, reasonable in amount, and disclosed in detail to 

the borrower as provided in paragraphs I.B.10 and VI.B.1.

B. Specific Fee Provisions.

1. Schedule of Fees. Servicer shall maintain and keep current a 

schedule of common non-state specific fees or ranges of fees that 

may be charged to borrowers by or on behalf of Servicer. Servicer 

shall make this schedule available on its website and to the 

borrower or borrower’s authorized representative upon request. 

The schedule shall identify each fee, provide a plain language 

explanation of the fee, and state the maximum amount of the fee or 

how the fee is calculated or determined.

2. Servicer may collect a default-related fee only if the fee is for 

reasonable and appropriate services actually rendered and one of 

the following conditions is met:

a. the fee is expressly or generally authorized by the loan 

instruments and not prohibited by law or this Agreement;

b. the fee is permitted by law and not prohibited by the loan 

instruments or this Agreement; or

c. the fee is not prohibited by law, this Agreement or the loan 

instruments and is a reasonable fee for a specific service 

requested by the borrower that is collected only after clear 

and conspicuous disclosure of the fee is made available to 

the borrower.

3. Attorneys’ Fees. In addition to the limitations in paragraph VI.B.2

above, attorneys’ fees charged in connection with a foreclosure 

action or bankruptcy proceeding shall only be for work actually 

performed and shall not exceed reasonable and customary fees for 

such work. In the event a foreclosure action is terminated prior to 

the final judgment and/or sale for a loss mitigation option, a 

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reinstatement, or payment in full, the borrower shall be liable only 

for reasonable and customary fees for work actually performed.

4. Late Fees.

a. Servicer shall not collect any late fee or delinquency charge 

when the only delinquency is attributable to late fees or 

delinquency charges assessed on an earlier payment, and 

the payment is otherwise a full payment for the applicable 

period and is paid on or before its due date or within any 

applicable grace period.

b. Servicer shall not collect late fees (i) based on an amount 

greater than the past due amount; (ii) collected from the 

escrow account or from escrow surplus without the 

approval of the borrower; or (iii) deducted from any regular 

payment.

c. Servicer shall not collect any late fees for periods during 

which (i) a complete loan modification application is under 

consideration; (ii) the borrower is making timely trial 

modification payments; or (iii) a short sale offer is being 

evaluated by Servicer.

C. Third-Party Fees.

1. Servicer shall not impose unnecessary or duplicative property 

inspection, property preservation or valuation fees on the borrower, 

including, but not limited to, the following:

a. No property preservation fees shall be imposed on eligible 

borrowers who have a pending application with Servicer 

for loss mitigation relief or are performing under a loss 

mitigation program, unless Servicer has a reasonable basis 

to believe that property preservation is necessary for the 

maintenance of the property, such as when the property is 

vacant or listed on a violation notice from a local 

jurisdiction;

b. No property inspection fee shall be imposed on a borrower 

any more frequently than the timeframes allowed under 

GSE or HUD guidelines unless Servicer has identified 

specific circumstances supporting the need for further 

property inspections; and

c. Servicer shall be limited to imposing property valuation 

fees (e.g., BPO) to once every 12 months, unless other 

valuations are requested by the borrower to facilitate a 

short sale or to support a loan modification as outlined in 

paragraph IV.G.3.a, or required as part of the default or 

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foreclosure valuation process.

2. Default, foreclosure and bankruptcy-related services performed by 

third parties shall be at reasonable market value.

3. Servicer shall not collect any fee for default, foreclosure or 

bankruptcy-related services by an affiliate unless the amount of the 

fee does not exceed the lesser of (a) any fee limitation or allowable 

amount for the service under applicable state law, and (b) the 

market rate for the service. To determine the market rate, Servicer 

shall obtain annual market reviews of its affiliates’ pricing for such 

default and foreclosure-related services; such market reviews shall 

be performed by a qualified, objective, independent third-party 

professional using procedures and standards generally accepted in 

the industry to yield accurate and reliable results. The independent 

third-party professional shall determine in its market survey the 

price actually charged by third-party affiliates and by independent 

third party vendors.

4. Servicer shall be prohibited from collecting any unearned fee, or 

giving or accepting referral fees in relation to third-party default or 

foreclosure-related services.

5. Servicer shall not impose its own mark-ups on Servicer initiated 

third-party default or foreclosure-related services.

D. Certain Bankruptcy Related Fees.

1. Servicer must not collect any attorney’s fees or other charges with 

respect to the preparation or submission of a POC or MRS 

document that is withdrawn or denied, or any amendment thereto 

that is required, as a result of a substantial misstatement by 

Servicer of the amount due.

2. Servicer shall not collect late fees due to delays in receiving full 

remittance of debtor’s payments, including trial period or 

permanent modification payments as well as post-petition conduit 

payments in accordance with 11 U.S.C. § 1322(b)(5), that debtor 

has timely (as defined by the underlying Chapter 13 plan) made to 

a chapter 13 trustee.

VII. FORCE-PLACED INSURANCE.

A. General Requirements for Force-Placed Insurance.

1. Servicer shall not obtain force-placed insurance unless there is a 

reasonable basis to believe the borrower has failed to comply with 

the loan contract’s requirements to maintain property insurance. 

For escrowed accounts, Servicer shall continue to advance 

payments for the homeowner’s existing policy, unless the borrower 

or insurance company cancels the existing policy.

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For purposes of this section VII, the term “force-placed insurance” 

means hazard insurance coverage obtained by Servicer when the 

borrower has failed to maintain or renew hazard or wind insurance 

on such property as required of the borrower under the terms of the 

mortgage.

2. Servicer shall not be construed as having a reasonable basis for 

obtaining force-placed insurance unless the requirements of this 

section VII have been met.

3. Servicer shall not impose any charge on any borrower for forceplaced insurance with respect to any property securing a federally 

related mortgage unless:

a. Servicer has sent, by first-class mail, a written notice to the 

borrower containing:

i. A reminder of the borrower’s obligation to maintain 

hazard insurance on the property securing the 

federally related mortgage;

ii. A statement that Servicer does not have evidence of 

insurance coverage of such property;

iii. A clear and conspicuous statement of the 

procedures by which the borrower may demonstrate 

that the borrower already has insurance coverage;

iv. A statement that Servicer may obtain such coverage 

at the borrower’s expense if the borrower does not 

provide such demonstration of the borrower’s 

existing coverage in a timely manner;

v. A statement that the cost of such coverage may be 

significantly higher than the cost of the 

homeowner’s current coverage;

vi. For first lien loans on Servicer’s primary servicing 

system, a statement that, if the borrower desires to 

maintain his or her voluntary policy, Servicer will 

offer an escrow account and advance the premium 

due on the voluntary policy if the borrower: (a) 

accepts the offer of the escrow account; (b) provides 

a copy of the invoice from the voluntary carrier; (c) 

agrees in writing to reimburse the escrow advances 

through regular escrow payments; (d) agrees to 

escrow to both repay the advanced premium and to 

pay for the future premiums necessary to maintain 

any required insurance policy; and (e) agrees 

Servicer shall manage the escrow account in 

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accordance with the loan documents and with state 

and federal law; and

vii. A statement, in the case of single interest coverage, 

that the coverage may only protect the mortgage 

holder’s interest and not the homeowner’s interest.

b. Servicer has sent, by first-class mail, a second written 

notice, at least 30 days after the mailing of the notice under 

paragraph VII.A.3.a that contains all the information 

described in each clause of such paragraph.

c. Servicer has not received from the borrower written 

confirmation of hazard insurance coverage for the property 

securing the mortgage by the end of the 15-day period 

beginning on the date the notice under paragraph VII.A.3.b

was sent by Servicer.

4. Servicer shall accept any reasonable form of written confirmation 

from a borrower or the borrower’s insurance agent of existing 

insurance coverage, which shall include the existing insurance 

policy number along with the identity of, and contact information 

for, the insurance company or agent.

5. Servicer shall not place hazard or wind insurance on a mortgaged 

property, or require a borrower to obtain or maintain such 

insurance, in excess of the greater of replacement value, lastknown amount of coverage or the outstanding loan balance, unless 

required by Applicable Requirements, or requested by borrower in 

writing.

6. Within 15 days of the receipt by Servicer of evidence of a 

borrower’s existing insurance coverage, Servicer shall:

a. Terminate the force-placed insurance; and

b. Refund to the consumer all force-placed insurance 

premiums paid by the borrower during any period during 

which the borrower’s insurance coverage and the force 

placed insurance coverage were each in effect, and any 

related fees charged to the consumer’s account with respect 

to the force-placed insurance during such period.

7. Servicer shall make reasonable efforts to work with the borrower

to continue or reestablish the existing homeowner’s policy if there 

is a lapse in payment and the borrower’s payments are escrowed.

8. Any force-placed insurance policy must be purchased for a 

commercially reasonable price.

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9. No provision of this section VII shall be construed as prohibiting 

Servicer from providing simultaneous or concurrent notice of a 

lack of flood insurance pursuant to section 102(e) of the Flood 

Disaster Protection Act of 1973.

VIII. GENERAL SERVICER DUTIES AND PROHIBITIONS.

A. Measures to Deter Community Blight.

1. Servicer shall develop and implement policies and procedures to 

ensure that REO properties do not become blighted.

2. Servicer shall develop and implement policies and procedures to 

enhance participation and coordination with state and local land 

bank programs, neighborhood stabilization programs, nonprofit 

redevelopment programs, and other anti-blight programs, including 

those that facilitate discount sale or donation of low-value REO 

properties so that they can be demolished or salvaged for 

productive use.

3. As indicated in I.A.18, Servicer shall (a) inform borrower that if 

the borrower continues to occupy the property, he or she has 

responsibility to maintain the property, and an obligation to 

continue to pay taxes owed, until a sale or other title transfer action 

occurs; and (b) request that if the borrower wishes to abandon the 

property, he or she contact Servicer to discuss alternatives to 

foreclosure under which borrower can surrender the property to 

Servicer in exchange for compensation.

4. When the Servicer makes a determination not to pursue foreclosure 

action on a property with respect to a first lien mortgage loan, 

Servicer shall:

a. Notify the borrower of Servicer’s decision to release the 

lien and not pursue foreclosure, and inform borrower about 

his or her right to occupy the property until a sale or other 

title transfer action occurs; and

b. Notify local authorities, such as tax authorities, courts, or 

code enforcement departments, when Servicer decides to 

release the lien and not pursue foreclosure.

B. Tenants’ Rights.

1. Servicer shall comply with all applicable state and federal laws 

governing the rights of tenants living in foreclosed residential 

properties. 

2. Servicer shall develop and implement written policies and 

procedures to ensure compliance with such laws.

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IX. GENERAL PROVISIONS, DEFINITIONS, AND IMPLEMENTATION.

A. Applicable Requirements.

1. The servicing standards and any modifications or other actions 

taken in accordance with the servicing standards are expressly 

subject to, and shall be interpreted in accordance with, (a) 

applicable federal, state and local laws, rules and regulations, 

including, but not limited to, any requirements of the federal 

banking regulators, (b) the terms of the applicable mortgage loan 

documents, (c) Section 201 of the Helping Families Save Their 

Homes Act of 2009, and (d) the terms and provisions of the 

Servicer Participation Agreement with the Department of Treasury, 

any servicing agreement, subservicing agreement under which 

Servicer services for others, special servicing agreement, mortgage 

or bond insurance policy or related agreement or requirements to 

which Servicer is a party and by which it or its servicing is bound 

pertaining to the servicing or ownership of the mortgage loans, 

including without limitation the requirements, binding directions, 

or investor guidelines of the applicable investor (such as Fannie 

Mae or Freddie Mac), mortgage or bond insurer, or credit enhancer 

(collectively, the “Applicable Requirements”).

2. In the event of a conflict between the requirements of the 

Agreement and the Applicable Requirements with respect to any 

provision of this Agreement such that the Servicer cannot comply 

without violating Applicable Requirements or being subject to 

adverse action, including fines and penalties, Servicer shall 

document such conflicts and notify the Monitor and the 

Monitoring Committee that it intends to comply with the 

Applicable Requirements to the extent necessary to eliminate the 

conflict. Any associated Metric provided for in the Enforcement 

Terms will be adjusted accordingly.

B. Definitions.

1. In each instance in this Agreement in which Servicer is required to 

ensure adherence to, or undertake to perform certain obligations, it 

is intended to mean that Servicer shall: (a) authorize and adopt 

such actions on behalf of Servicer as may be necessary for Servicer 

to perform such obligations and undertakings; (b) follow up on any 

material non-compliance with such actions in a timely and 

appropriate manner; and (c) require corrective action be taken in a 

timely manner of any material non-compliance with such 

obligations.

2. References to Servicer shall mean Wells Fargo Bank, N.A. and 

Wells Fargo & Company and shall include Servicer’s successors 

and assignees in the event of a sale of all or substantially all of the 

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assets of Servicer or of Servicer’s division(s) or major business 

unit(s) that are engaged as a primary business in customer-facing 

servicing of residential mortgages on owner-occupied properties. 

The provisions of this Agreement shall not apply to those divisions 

or major business units of Servicer that are not engaged as a

primary business in customer-facing servicing of residential 

mortgages on owner-occupied one-to-four family properties on its 

own behalf or on behalf of investors.

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EXHIBIT B

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DISTRIBUTION OF FUNDS

1. Any amount of the Direct Payment Settlement Amount that is not 

distributed pursuant to Paragraph 2 shall be distributed as follows. 

a. Federal Payment Settlement Amount. The Escrow Agent shall distribute 

$911,777,917.00 (the “Federal Payment Settlement Amount”) to the United 

States in accordance with instructions to be provided by the United States. 

i. Of the Federal Payment Settlement Amount, $684,090,417.00 

shall, following payment of any amounts owed as a result of resolutions 

pursuant to 31 U.S.C. § 3730(d), and subject to 28 U.S.C. § 527 (Note), 

be deposited for losses incurred into FHA’s Capital Reserve Account,

the Veterans Housing Benefit Program Fund (pursuant to 38 U.S.C. § 

3722(c)(3), as being incident to housing loan operations) or as otherwise 

directed by the Department of Veterans Affairs, and as directed by Rural 

Housing Service, Department of Agriculture, in accordance with 

instructions from the United States. The United States intends that such 

deposits conform with the Miscellaneous Receipts Act and other law.

ii. The Federal Payment Settlement Amount includes resolution of the 

following qui tam actions: (i) $75,000,000 from the claims in United 

States ex rel. Lagow v. Countrywide Financial Corp., et al., Civil 

Action No. CV-09-2040 (E.D.N.Y.); (ii) $45,000,000 from those 

claims in United States ex rel. Bibby et al. v. JPMorgan Chase et 

al., No. 2:11-cv-00535-RHL-RJJ (N.D. Ga.) that are expressly 

released by the United States in this litigation; (iii) $95,000,000

from those claims in United States ex rel. Szymoniak v. 

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GARCIA 04317
B-2

[SEALED], Civ No. 0:10-cv-01465 (D.S.C.) and in United States 

ex rel. Szymoniak v. [SEALED], Civ No. 3:10-cv-575 (W.D.N.C.) 

that are expressly released by the United States in this litigation; 

(iv) $6,500,000 from the claims in United States ex rel. Mackler v. 

Bank of America, N.A., et al., 11-CV-3270 (SLT) (E.D.N.Y.); and 

(v) $6,187,500 from the claims in United States ex rel. Harris v. 

J.P. Morgan Chase & Co., et al., Civil Action No. 10-10068-GAO

(D. Mass). Following payment of any amounts owed as a result of 

resolutions pursuant to 31 U.S.C. § 3730(d), and subject to 28 U.S.C. § 

527 (Note), these amounts shall be deposited into FHA’s Capital Reserve 

Account and the Veterans Housing Benefit Program Fund (pursuant to 

38 U.S.C. § 3722(c)(3), as being incident to housing loan operations) or 

as otherwise directed by the Department of Veterans Affairs, in 

accordance with instructions from the United States. The United States 

intends that such deposits conform with the Miscellaneous Receipts Act 

and other law.

b. State Payment Settlement Amounts. In accordance with written 

instructions from each State Attorney General, the Escrow Agent shall 

distribute cash payments in the total amounts set forth in the attached 

Exhibit B-1.

i. Each State Attorney General shall designate the uses of the funds 

set forth in the attached Exhibit B-1. To the extent practicable, 

such funds shall be used for purposes intended to avoid 

preventable foreclosures, to ameliorate the effects of the 

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GARCIA 04318
B-3

foreclosure crisis, to enhance law enforcement efforts to prevent 

and prosecute financial fraud, or unfair or deceptive acts or 

practices and to compensate the States for costs resulting from the 

alleged unlawful conduct of the Defendants. Such permissible 

purposes for allocation of the funds include, but are not limited to, 

supplementing the amounts paid to state homeowners under the 

Borrower Payment Fund, funding for housing counselors, state and 

local foreclosure assistance hotlines, state and local foreclosure 

mediation programs, legal assistance, housing remediation and 

anti-blight projects, funding for training and staffing of financial 

fraud or consumer protection enforcement efforts, and civil 

penalties. Accordingly, each Attorney General has set forth 

general instructions for the funds in the attached Exhibit B-2.

ii. No more than ten percent of the aggregate amount paid to the State 

Parties under this paragraph 1(b) may be designated as a civil 

penalty, fine, or similar payment. The remainder of the payments 

is intended to remediate the harms to the States and their 

communities resulting from the alleged unlawful conduct of the 

Defendant and to facilitate the implementation of the Borrower 

Payment Fund and consumer relief.

2. Of the Direct Payment Settlement Amount, $1,579,813,925.00 shall be 

distributed as follows:

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GARCIA 04319
B-4

a. In accordance with written instructions from the State members of the 

Monitoring Committee, the Escrow Agent shall make available 

$1,489,813,925.00 to the Administrator to provide cash payments to 

borrowers whose homes were finally sold or taken in foreclosure 

between and including January 1, 2008 and December 31, 2011; who 

submit claims arising from the Covered Conduct; and who otherwise 

meet criteria set forth by the State members of the Monitoring 

Committee. Any amounts made available hereunder remain a part of 

the Qualified Settlement Fund until distributed to borrowers and shall 

be administered in accordance with the terms set forth in Exhibit C.

b. In accordance with written instructions from the State members of the 

Monitoring Committee, the Escrow Agent shall distribute 

$15,000,000.00 to the National Association of Attorneys General 

(NAAG) to create and administer the “Financial Services and 

Consumer Protection Enforcement, Education and Training Fund.” 

Such Fund shall be used to pay for expenses and training relating to 

the investigation and prosecution of cases involving fraud, unfair and 

deceptive acts and practices, and other illegal conduct related to 

financial services or state consumer protection laws. Illustrative 

examples include, but are not limited to, travel costs associated with 

investigation, litigation, or settlement of financial services or consumer 

protection cases; expert witness and consulting fees, training 

programs, NAAG Consumer Protection Conferences, information 

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GARCIA 04320
B-5

exchanges, public education campaigns, and other uses. The State 

members of the Monitoring Committee shall develop rules and 

regulations governing the Financial Services and Consumer Protection 

Enforcement, Education and Training Fund in a separate memorandum 

of understanding after this Consent Judgment has been entered. 

c. In accordance with written instructions from the State members of the 

Monitoring Committee, the Escrow Agent shall distribute a total of 

$10,000,000.00 to the members of the Executive Committee and the 

Ameriquest Financial Services Fund (“AMFSF”) for reimbursement of 

costs and attorneys fees incurred during the investigation of this case 

and the settlement negotiations and for subsequent expenditures as 

authorized by each Attorney General. Such payments shall be made as 

designated by the Iowa Attorney General as the Chairman of the 

Executive Committee, and shall be made to the State Attorneys 

General of Arizona, California, Colorado, Connecticut, Delaware, 

Florida, Illinois, Iowa, Massachusetts, North Carolina, Ohio, 

Tennessee, Texas, and Washington and the Maryland Department of 

Labor, Licensing and Regulation and the Ameriquest Financial 

Services Fund. The authorized representatives of each state attorney 

general, the Maryland Department of Labor, Licensing and Regulation 

and the AMFSF will provide a letter to the Escrow Agent directing 

how each separate payment should be made. 

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GARCIA 04321
B-6

d. In accordance with written instructions from the State members of the 

Monitoring Committee, the Escrow Agent shall distribute 

$65,000,000.00 to the Conference of State Bank Supervisors (CSBS). 

CSBS shall use $15,000,000 to establish the “State Financial 

Regulation Fund,” a fund to be managed and used by CSBS to support 

and improve state financial regulation and supervision. From the 

balance, CSBS shall transfer $1,000,000 per state to the state financial 

regulators who have signed this Consent Judgment. Where multiple 

agencies within a single state claim regulatory jurisdiction, CSBS shall 

transfer that state’s funds as provided in an agreement between or 

among those regulatory agencies. In addition, state financial 

regulators may, at their discretion, enter into an agreement with CSBS 

for the management and disbursement of all or a portion of the funds 

paid to them. If, for any reason, a state financial regulator elects to 

forego receipt of their transfer payment or in the case of a participating 

state where the state financial regulator declines to sign this Consent 

Judgment, such funds shall revert to the State Financial Regulation 

Fund. 

3. Any interest earned on funds held by the Escrow Agent may be used, at the 

discretion of the State members of the Monitoring Committee, to pay the costs 

and expenses of the escrow or the costs and expenses of administration, including 

taxes, or for any other housing related purpose. 

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GARCIA 04322
B-7

4. Notwithstanding any implication to the contrary in any of the provisions of 

Exhibit B-2, all instructions therein shall be subject to the provisions of paragraph 

1.b(i) and 1.b(ii) of this Exhibit B. If and to the extent any amounts are paid into 

a fund or escrow account established by a State Party that is not an integral part of 

the government of such State, it is intended that such fund or account be deemed a 

Qualified Settlement Fund within the meaning of Treasury Regulation Section 

1.468B-1 of the U.S. Internal Revenue Code of 1986, as amended. To the extent 

that any state designates any payments hereunder as a civil penalty, such state 

shall provide the Defendant(s), upon request, such information as is reasonably 

necessary for tax reporting purposes with respect to such civil penalty.

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GARCIA 04323
EXHIBIT B1

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GARCIA 04324
EXHIBIT B1

STATE DOLLAR 

ALLOCATION STATE DOLLAR ALLOCATION

AK $3,286,839 MS $13,580,374

AL $25,305,692 MT $4,858,276

AR $12,830,241 NC $60,852,159

AZ $97,784,204 ND $1,947,666

CA $410,576,996 NE $8,422,528

CO $50,170,188 NH $9,575,447

CT $26,102,142 NJ $72,110,727

DC $4,433,081 NM $11,174,579

DE $7,913,923 NV $57,368,430

FL $334,073,974 NY $107,642,490

GA $99,365,105 OH $92,783,033

HI $7,911,883 OR $29,253,190

IA $14,651,922 PA $66,527,978

ID $13,305,209 RI $8,500,755

IL $105,806,405 SC $31,344,349

IN $43,803,419 SD $2,886,824

KS $13,778,401 TN $41,207,810

KY $19,198,220 TX $134,628,489

LA $21,741,560 UT $21,951,641

MA $44,450,668 VA $66,525,233

MD $59,697,470 VT $2,552,240

ME $6,907,023 WA $54,242,749

MI $97,209,465 WI $30,191,806

MN $41,536,169 WV $5,748,915

MO $39,583,212 WY $2,614,515

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GARCIA 04325
EXHIBIT B2

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GARCIA 04326
EXHIBIT B2

ALABAMA

The Court awards the State of Alabama a judgment in the amount of $25,305,692, which 

shall be paid by electronic transfer to the Office of the Attorney General. Of this amount,

the Court awards $2,530,569 dollars in civil penalties (or 10% of the total) as defined by 

and in accordance with Code of Alabama, 1975, §8-19-11 for misconduct relating to the 

banks’ robo-signing in violation of Alabama’s Deceptive Trade Practices Act. The 

remaining amount shall be used by the Attorney General, at his sole discretion, for costs 

of investigation and litigation, for law enforcement efforts to prevent and prosecute 

financial fraud, and/or for public protection purposes, such as to defray the operating cost 

of any function of the Attorney General’s Office that protects citizens, whether through 

investigation, representation, regulation, mediation, prosecution, victims’ assistance, or 

consumer education concerning consumer-related financial or other crimes, or, at the sole 

discretion of the Attorney General, to be used for housing programs, housing counseling, 

legal assistance, foreclosure prevention hotlines, foreclosure mediation and investigation 

of financial fraud or other wrongdoing overseen by any division of the Attorney 

General’s Office.

In addition, the Attorney General may distribute any amount from the funds, at his sole 

discretion, to other governmental entities or charitable organizations whose eleemosynary 

purposes benefit those affected by the aforementioned misconduct

ALASKA

Alaska’s payment of $3,286,839.00 shall be to the State of Alaska and delivered to the 

Office of the Attorney General, 1031 West 4th Avenue, Suite 200, Anchorage, Alaska 

99501.

ARIZONA

1. State Payment Settlement Amounts, Consent Judgment Ex. B, Paragraph 1(b)(i) 

Arizona’s share of the State Payment Settlement Amounts (“Funds”) provided under this 

Consent Judgment, and any interest thereon, shall be made payable to the Office of the 

Arizona Attorney General. The Attorney General shall direct the use of the Funds in 

Arizona. The Funds shall be used for purposes intended to avoid preventable 

foreclosures, to ameliorate the effects of the foreclosure crisis, to enhance law 

enforcement efforts to prevent and prosecute financial fraud, or unfair or deceptive acts 

or practices and to compensate the State for costs resulting from the alleged unlawful 

conduct of the Defendants. Such permissible purposes for allocation of the funds 

include, but are not limited to, supplementing the amounts paid to state homeowners 

under the Borrower Payment Fund, funding for housing counselors, state and local 

foreclosure assistance hotlines, state and local foreclosure mediation programs, legal 

assistance, housing remediation and anti-blight projects, funding for training and staffing 

of financial fraud or consumer protection enforcement efforts, and civil penalties. 

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GARCIA 04327
B2-2

The Attorney General shall deposit the Funds with the State Treasurer and the Funds 

shall be held in a separate Court Ordered Trust Fund account and all interest thereon 

deposited into that account and used only for the purposes set forth herein. 

2. Executive Committee Payment, Consent Judgment Ex. B, Paragraph 2(c) 

Any funds paid to the Office of the Arizona Attorney General as reimbursement for 

attorneys fees and costs for serving on the Executive Committee, and any interest 

thereon, shall be deposited into the consumer fraud revolving fund pursuant to A.R.S. § 

44-1531.01 and used for the purposes set forth therein. 

ARKANSAS

For the payment to the State of Arkansas as provided in Paragraph III (3) of the Consent 

Judgment, and it accordance with the provisions of Paragraph 1. (b) of Exhibit B to the 

Consent Judgment, Attorney General Dustin McDaniel directs that the total anticipated 

sum of Twelve Million, Eight Hundred Thirty Thousand, two hundred and forty-one

dollars ($12,830,241) be paid to the State of Arkansas Office of the Attorney General 

(and delivered to Carol Thompson, Chief Financial Officer) to then be distributed by the 

Attorney General to the following entities for the following purposes:

1. To the Arkansas Development Finance Authority to fund programs that provide to 

Arkansas residents down payment assistance, financial literacy and mortgage and 

foreclosure counseling ,tax credit assistance, rental assistance, low-interest 

financing, land acquisition, new construction, rehabilitation construction, and 

reconstruction, the sum of Nine Million dollars ($9,000,000.00);

2. To the Arkansas Access to Justice Commission to provide equal access to justice 

to Arkansas residents affected by the mortgage and foreclosure crisis, the sum of 

Two Million dollars ($2,000,000.00);

3. To the University of Arkansas School of Law to support its legal aid clinic, which 

provides legal representation to low-income Arkansans, the sum of Five Hundred 

Thousand dollars ($500,000.00);

4. To the University of Arkansas at Little Rock School of Law to support its legal 

aid clinic, which provides legal representation to low-income Arkansans, the sum 

of Five Hundred Thousand dollars ($500,000.00);

And, to the Arkansas Treasury the remaining funds for fees, costs, and the costs of

investigation and pursuit of this matter, the sum of Eight Hundred Thirty Thousand, two 

hundred and forty-one dollars ($830,241.00).

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GARCIA 04328
B2-3

CALIFORNIA

The payment to the California Attorney General’s Office shall be used as follows:

a) Ten percent of the payment shall be paid as a civil penalty and deposited in the 

Unfair Competition Law Fund; 

b) The remainder shall be paid and deposited into a Special Deposit Fund created for 

the following purposes: for the administration of the terms of this Consent 

Judgment; monitoring compliance with the terms of this Consent Judgment and 

enforcing the terms of this Consent Judgment; assisting in the implementation of 

the relief programs and servicing standards as described in this Consent 

Judgment; supporting the Attorney General’s continuing investigation into 

misconduct in the origination, servicing, and securitization of residential 

mortgage loans; to fund consumer fraud education, investigation, enforcement 

operations, litigation, public protection and/or local consumer aid; to provide 

borrower relief; to fund grant programs to assist housing counselors or other legal 

aid agencies that represent homeowners, former homeowners, or renters in 

housing-related matters; to fund other matters, including grant programs, for the 

benefit of California homeowners affected by the mortgage/foreclosure crisis; or 

to engage and pay for third parties to develop or administer any of the programs 

or efforts described above.

COLORADO

1. State Payment Settlement Amounts, Consent Judgment Ex. B, Paragraph 1(b)(i)

The first $1.0 Million paid to the State of Colorado pursuant to Ex. B, ¶ 1(b)(i), and any 

interest thereon, shall be held in trust by the Colorado Attorney General and used for 

future consumer protection and antitrust enforcement and education efforts. The 

remainder of the funds paid under this provision, and any interest thereon, shall be held in 

trust by the Colorado Attorney General and used for programs relating to foreclosure 

prevention, loan modification and housing and for future consumer protection and 

antitrust enforcement and education efforts.

2. Executive Committee Payment, Consent Judgment Ex. B, Paragraph 2(c) 

The funds paid to the State of Colorado under Ex. B, ¶ 2(c), and any interest thereon,

shall be held in trust by the Colorado Attorney General for the following purposes. First, 

these funds, and any interest thereon, shall be used for reimbursement of the state’s actual 

costs and attorney fees incurred in this matter. The remaining funds, and any interest 

thereon, shall be held in trust by the Colorado Attorney General and may be used for 

programs related to foreclosure prevention, loan modification and housing and for future 

consumer protection and antitrust enforcement and education efforts.

CONNECTICUT

The Escrow Agent shall pay up to $2.2 million of the Direct Payment Settlement Amount 

payable to the State of Connecticut pursuant to paragraph 1(b) of Exhibit B of this 

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GARCIA 04329
B2-4

Consent Judgment to provide immediate assistance to Connecticut residents seeking to 

avoid foreclosure by funding housing counselor positions through the Connecticut 

Housing Finance Authority and/or the Department of Economic and Community 

Development and by funding positions and other support to facilitate and expand the 

Judicial Branch’s foreclosure related programs. All of the remaining Direct Payment 

Settlement Amount payable to the State of Connecticut pursuant to paragraph 1(b) of 

Exhibit B of this Consent Judgment shall be disbursed at the written instruction of the 

Office of the Attorney General after consultation by the Office of the Attorney General 

with the Office of Policy and Management and appropriate officials of the State of 

Connecticut as may be required by Connecticut law.

The Escrow Agent shall pay any Direct Payment Settlement Amount payable to the 

Office of the Attorney General pursuant to paragraph 2(c) of Exhibit B of this Consent 

Judgment to the Attorney General’s Consumer Protection Fund, which funds shall be 

expended to fund protection and education of consumers, including, without limitation, 

legal assistance to Connecticut citizens seeking to avoid foreclosure, grants to non-profit 

legal aid organizations assisting Connecticut citizens seeking to avoid foreclosure, 

funding to support implementation of this Consent Judgment by the Office of the 

Attorney General, and for any other purposes intended to avoid preventable foreclosures 

and to ameliorate the effects of the foreclosure crisis. 

DELAWARE

The amount of $7,913,923.00 will be paid to the Delaware Department of Justice by wire 

transfer or certified check payable to the “State of Delaware – Consumer Protection 

Fund”, which shall be used in the sole discretion of the Delaware Department of Justice 

exclusively for the following purposes related to consumer protection efforts to address 

the mortgage and foreclosure crisis, financial fraud and deception, and housing-related 

conduct: (1) investigations, enforcement operations, litigation, and other initiatives 

conducted or overseen by the Delaware Department of Justice Fraud Division, including 

training and staffing, (2) the Delaware Automatic Residential Mortgage Foreclosure 

Mediation Program or any successor program, and (3) grants or other aid to agencies and 

organizations approved by the Delaware Department of Justice for consumer assistance, 

consumer education, credit and housing counseling, mediation programs, legal assistance, 

training, or staffing. If the payment is made by certified check, it shall be delivered to:

Delaware Department of Justice

Fraud Division, Consumer Protection Unit

820 N. French Street

Wilmington, Delaware 19801

ATTN: Ian R. McConnel, Division Chief

DISTRICT of COLUMBIA

The payment for the District of Columbia shall be paid to the “D.C. Treasurer” in 

accordance with instructions provided by the Office of the Attorney General for the 

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GARCIA 04330
B2-5

District of Columbia. The payment shall be used by the District of Columbia 

Government, subject to appropriation, for one or more of the following purposes: (1) 

mortgage-related or foreclosure-related counseling, (2) mortgage-related or foreclosurerelated legal assistance or advocacy, (3) mortgage-related or foreclosure-related 

mediation, (4) outreach and/or assistance to help current and former homeowners secure 

the benefits for which they are eligible under mortgage-related or foreclosure-related 

settlements or judgments, (5) enforcement work in the area of financial fraud or 

consumer protection.

FLORIDA

Of the payment identified in Exhibit B-1 that Defendants are making to settle this matter 

with the Attorney General, State of Florida, Department of Legal Affairs, 10% is to be 

paid to the State of Florida as a penalty; the remainder shall be held in escrow by the 

escrow agent for subsequent disbursement as directed in writing by the Florida Attorney 

General for purposes consistent with Exhibit B, paragraph 1b(i) of this consent judgment

GEORGIA

The State Settlement Payment Amount to Georgia shall be paid to the state treasury to the 

credit of the general fund and shall be available for appropriation by the General 

Assembly for any purpose permitted by state law, including, to the extent practicable but 

not limited to, those purposes intended to avoid preventable foreclosures, to ameliorate 

the effects of the foreclosure crisis, to enhance law enforcement efforts to prevent and 

prosecute financial fraud or unfair or deceptive acts or practices, or to compensate 

Georgia for costs resulting from the alleged unlawful conduct of the Defendants.

HAWAII

The monies are to be held in trust for the benefit of homeowners and others in the State of 

Hawaii who are, have been, or may be affected by mortgage loan proceedings. This 

includes, but is not limited to, those who have been subject to foreclosure, are in 

foreclosure, are at risk of foreclosure, have delinquent mortgage loan payments, have 

negative equity in their homes, have lost their homes due to foreclosure, have been

unable to refinance their mortgage loans, or are leasing a dwelling affected by 

foreclosure. The monies shall be used for housing and financial counseling, public 

education, mediation, dispute resolution, and enforcement of laws and agreements 

protecting the rights of homeowners and lessees. The monies shall be used only for 

these purposes. The monies shall be deposited into an administrative trust account to be 

administered by the Attorney General of the State of Hawaii, who as custodian shall have 

sole discretion to make determinations as to the amounts and the purposes for which the 

monies are to be expended.

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GARCIA 04331
B2-6

IDAHO

Pursuant to Idaho Code § 48-606(5), the money paid to the State of Idaho, as identified in 

Exhibit B-1 of the Consent Judgment, shall be remitted to the consumer protection fund.

ILLINOIS

The funds allocated to the Attorney General of Illinois shall be expended, in the sole 

discretion of the Attorney General, primarily for programs to avoid foreclosure and 

ameliorate the effects on homeowners of the foreclosure crisis, including without 

limitation, the funding of: legal assistance, housing counseling, administrative oversight 

for the funded programs by the Attorney General or others; to support law enforcement 

efforts to prevent and prosecute financial fraud or unfair and deceptive acts or practices; 

and for such other purposes as directed by the Attorney General.

INDIANA

Pursuant to the terms of the Consent Judgment entered into between the (a) United States 

of America and the State Parties; and (b) the Defendants, the State of Indiana will accept 

and use its cash payments identified in Exhibit B-1 as follows:

1. The cash payment shall be made to the Office of the Indiana Attorney General.

2. A portion of the cash payment will be used for existing and new programs of the 

Attorney General, including but not limited to:

a. Consumer protection services and unfair and deceptive acts and practices 

investigations, enforcement, litigation, training, outreach, education, and related 

purposes.

b. Homeowner protection services, investigations, enforcement, litigation, training, 

outreach, education, and related purposes regarding mortgage lending and 

foreclosures.

c. Financial fraud protection services, investigations, enforcement, litigation, 

training, outreach, education, and related purposes.

d. Education and training of counselors, facilitators, attorneys, investigators, and 

other stakeholders regarding the terms of the settlement.

3. To carry out the purposes of paragraph two (2), funds may be deposited in the 

following fund accounts and other related fund accounts as necessary:

a. Homeowner Protection Unit Fund

b. Consumer Fees and Settlements Fund

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GARCIA 04332
B2-7

c. Identity Theft Unit Fund

d. Real Estate Appraiser Licensing Fund

e. Telephone Solicitation Fund

f. Consumer Assistance Program Fund

4. A portion of the cash payment will be used for a combination of existing and new 

programs created or administered by the Indiana General Assembly and state executive 

branch agencies, including but not limited to:

a. Housing counseling, foreclosure prevention, legal assistance, foreclosure 

mediation, victim assistance, and related purposes.

b. Settlement conferences, court facilitator services, and related purposes.

c. Land banks and related purposes.

d. Homeowner and renter energy assistance programs such as the Lower Income 

Hoosier Energy Assistance Program, with priority given to homeowners.

e. Workforce and job training programs to assist unemployed and underemployed 

state residents in increasing income to avoid foreclosure and obtain affordable 

housing.

f. Neighborhood stabilization programs and community blight remediation 

programs.

g. Law enforcement efforts and programs to prevent and address financial, 

consumer, mortgage lending, and mortgage foreclosure fraud.

h. Foreclosure prevention and assistance programs for military service members and 

veterans.

5. The Attorney General may allocate and designate up to ten percent of the cash 

payment as a civil penalty or fine.

6. The Attorney General shall allocate the cash payment among the identified 

purposes at his discretion based on the terms of the settlement.

IOWA

The Escrow Agent shall distribute the funds according to written direction received from 

the Attorney General of Iowa. The payment shall be used, at the sole discretion of the 

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GARCIA 04333
B2-8

Attorney General of Iowa, for any use permitted by law or this Consent Judgment, 

including but not limited to:

1) Purposes intended to avoid preventable foreclosures, to ameliorate the effects of 

the foreclosure crisis, to enhance law enforcement efforts to prevent and prosecute 

financial fraud and unfair or deceptive acts or practices, and to compensate the 

State of Iowa for costs resulting from the alleged unlawful conduct of the 

Defendant. Such permissible purposes for allocation of the funds further include, 

but are not limited to, supplementing the amounts paid to homeowners under the 

Borrower Payment Fund, funding for housing counselors, state and local 

foreclosure assistance hotlines, state and local foreclosure mediation programs, 

legal assistance, housing remediation and anti-blight projects, funding for training 

and staffing of financial fraud or consumer protection enforcement efforts, and 

civil penalties.

2) Investigative and administrative costs in connection with the matters addressed 

herein, including costs incurred before and after the signing of this Consent 

Judgment.

3) Public education relating to consumer fraud, mortgage, housing and financial 

issues and for enforcement of Iowa Code section 714.16, as referenced in Iowa 

Code section 714.16A.

4) Any other lawful purpose.

KANSAS

The Kansas Attorney General shall dedicate not less than 25 percent of any cash payment 

to the State of Kansas for the following purposes: 1) supporting the Attorney General’s 

ongoing investigation and prosecution of suppliers in the housing and financial sectors 

who violate the law; 2) resolving consumer complaints filed with the Attorney General to 

prevent foreclosures and remedy mortgage servicing abuses suffered by Kansas 

consumers; and 3) defraying the investigative, administrative and consumer education 

costs associated with this settlement, including but not limited to the dedication of 

additional staff to monitor compliance with its terms. The remainder of any cash 

payment to the State of Kansas that is not dedicated to the above purposes shall be 

designated as a civil penalty and shall be deposited to the State General Fund for 

appropriation by the Legislature

KENTUCKY

The Office of the Attorney General for the Commonwealth of Kentucky (hereinafter, the 

“Attorney General” and "the Commonwealth," respectively) shall direct the payment of 

$19,198,220 to the Commonwealth in a manner consistent with the terms of the Consent 

Judgment to which this Exhibit B-2 refers, such that any funds distributed by the 

Attorney General shall be used for purposes intended to avoid preventable foreclosures, 

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to ameliorate the effects of the foreclosure crisis, to enhance law enforcement efforts to 

prevent and prosecute financial fraud or unfair or deceptive acts or practices, to address 

the collateral consequences of such conduct, and to compensate the Commonwealth for 

costs resulting from the alleged unlawful conduct of the Defendants. Such payments 

shall include:

i) $5,048,220 in agency restricted funds to directly compensate the Office of the 

Attorney General for the reasonable costs of investigation and litigation of the 

alleged unlawful conduct of the Defendants, and to finance, within the Office of 

the Attorney General, ongoing consumer protection actions including, but not 

limited to, actions addressing any conduct similar to the alleged unlawful conduct 

of the Defendants by any entity not released by the State Release 

contemporaneously executed with this Consent Judgment; any civil and criminal 

investigations emanating from any allegedly improper conduct not released 

pursuant to the State Release perpetrated by any Defendant or any other person or 

entity; investigations and potential litigation pertaining to MERS or any related 

entity involving mortgage assignments in the Commonwealth; and claims of fraud 

or improper conduct relating to the pooling of, marketing of, or sale of any 

securities product involving or containing mortgage related payment streams; and 

ii) $14,150,000 to be distributed at the express direction of the Attorney General to 

agencies, organizations or entities to avoid preventable foreclosures, to ameliorate 

the effects of the foreclosure crisis, to enhance law enforcement efforts to prevent 

and prosecute financial fraud or unfair or deceptive acts or practices, to address 

the collateral consequences of such conduct, and to compensate the 

Commonwealth for costs resulting from the alleged unlawful conduct of the 

Defendants, including, but not limited to, the following: 

a. The Kentucky Housing Corporation, for purposes including, but not limited 

to, mortgage assistance to Kentucky homeowners, down payments and/or 

closing costs assistance for qualifying homebuyers, state and local foreclosure 

prevention and mediation programs, housing rehabilitation and anti-blight 

projects; 

b. The Kentucky Homeownership Protection Center, to provide homeownership 

and mortgage-related credit counseling to Kentucky consumers;

c. The four federally-funded civil legal aid service organizations within the 

Commonwealth, to provide housing-related legal assistance to low income 

consumers;

d. The Commonwealth's Unified Prosecutorial System (“UPS”), to support and 

sustain new and ongoing investigations and prosecutions relating to the 

foreclosure crisis and consequential criminal conduct plaguing local 

communities throughout the Commonwealth;

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e. The Commonwealth's Department of Financial Institutions ("DFI"), to assist 

in regulatory and educational efforts targeting financial services institutions 

subject to DFI's jurisdictional oversight, and consumers purchasing products 

and services from such institutions; 

f. The Commonwealth’s Department of Public Health, to support and maintain 

consumer safety and injury prevention programs, including but not limited to, 

lead abatement programs affecting low income individuals or communities; 

and

g. Within the discretion of the Attorney General, any other organization or entity 

substantially able to implement, manage, develop or support any program 

consistent with the aims of this settlement. 

Funds directed to any agency, organization or entity by the Attorney General pursuant to 

the terms of this paragraph shall be appropriated, administered and expended consistent 

with the terms of KRS Chapter 48, as applicable. 

LOUISIANA

Said payment shall be payable to the Louisiana Department of Justice Consumer 

Enforcement Fund and shall be used for investigation of mortgage and foreclosure 

matters, consumer protection law enforcement and education, litigation funds, public 

protection, reimbursement of costs and fees associated with the investigation of this 

matter, ensuring compliance under the terms of this agreement, federal, and state 

regulations, or for any other purpose, at the direction of the Attorney General, as 

permitted by state law.

MARYLAND

The settlement amount of $59,697,470.00 shall be paid for the benefit of the citizens of 

the State of Maryland, of which the maximum of 10%, or $5,969,747.00, shall be paid to 

the Office of the Attorney General of Maryland as a civil penalty to be deposited in the 

General Fund of the State of Maryland. The balance of $53,727,723.00 shall be held in 

trust pursuant to paragraph 1.b. of Exhibit B to the Consent Order, to be disbursed only as 

directed by the Office of the Attorney General of Maryland and to be used only for 

housing and foreclosure-relief purposes and for related investigations and enforcement 

activities. These purposes and activities may include, but are not limited to, the provision 

of housing counseling, legal assistance, criminal or civil investigations of fraud related to 

housing and the securitization of mortgage loans, enforcement activities, foreclosure 

prevention, foreclosure remediation, restitution, and programs to address community 

blight or to fund other programs reasonably targeted to benefit persons harmed by 

mortgage fraud.

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MASSACHUSETTS

Payment to Massachusetts (“the Payment”) shall be payable to the Commonwealth of 

Massachusetts and directed to the Office of the Attorney General, and shall be used, 

consistent with this paragraph, to provide consumer and community relief to remedy the 

alleged unfair and deceptive acts and practices that gave rise to this Consent Decree, 

allocated as follows:

a) $4.4 million shall be paid as a civil penalty pursuant to G.L. c. 93A, § 4;

b) $1.0 million shall be paid as costs and attorneys fees pursuant to G.L. c. 93A, § 4; 

c) $1.5 million shall be used for the administration of the terms of this Consent 

Judgment, monitoring compliance with the terms of this Consent Judgment and 

enforcing the terms of this Consent Judgment, assisting in the implementation of 

the relief programs and servicing standards as described in this Consent 

Judgment, and supporting the Attorney General’s continuing investigation into 

misconduct in the origination, servicing, and securitization of residential 

mortgage loans; and 

d) the remainder of the Payment shall be used to establish the Consumer and 

Community Foreclosure Relief Fund (“the Fund”) which shall be used, in the sole 

discretion of the Attorney General, to fund or assist in funding programs intended 

to avoid preventable foreclosures, mitigate the effects of foreclosures on 

borrowers and communities, provide compensation to borrowers, other persons 

and communities arising out of alleged unfair or deceptive acts or practices that 

gave rise to the Consent Decree, and/or enhance law enforcement efforts to 

prevent and prosecute financial fraud or unfair or deceptive acts or practices. The 

Fund may further be used to provide consumer education, outreach, local 

consumer aid funds, consumer protection enforcement funds, and public 

protection funds or for other uses permitted by state law. 

MAINE

Funds paid to the Maine Bureau of Consumer Credit Protection shall be deposited in the 

nonlapsing, dedicated account authorized to accept funds from any public or private 

source as described in 14 MRS § 6112(4) to fund the Bureau’s foreclosure prevention 

program. Amounts paid to the Maine Attorney General shall be used to fund foreclosure 

diversion programs including the Bureau of Consumer Credit Protection’s foreclosure 

prevention program and to legal aid organizations for direct legal services to consumers 

in support of foreclosure prevention efforts, to defray the costs of the inquiry leading 

hereto or for other uses permitted by state law at the sole discretion of the Attorney 

General

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MICHIGAN

Payment shall be forwarded at the direction of the Michigan Attorney General. Said 

payment shall be used for attorneys’ fees and other costs of the inquiry leading hereto, 

and other uses as are consistent with state law and this consent judgment.

MINNESOTA

The State of Minnesota shall use the funds paid pursuant to Exhibit B-1 (“Minnesota 

Direct Payment Funds”) to provide restitution to Minnesota residents who were harmed 

by Defendant’s origination, servicing, or foreclosure practices. The Minnesota Direct 

Payment Funds shall be deposited into an interest-bearing escrow account. The 

reasonable expenses of the escrow account and for developing, administering, and 

implementing the restitution plan, including the expenses of settlement administration 

and independent claims review, may be paid with Minnesota Direct Payment Funds. 

After full and fair restitution has been paid to individuals harmed by Defendant’s 

practices as set forth above, any amount remaining shall be deposited into the State of 

Minnesota General Fund. Defendant shall provide to the settlement administrator 

retained by the Minnesota Attorney General to administer the Minnesota Direct Payment 

Funds (the “Settlement Administrator”) all information already in its possession and 

readily available that is reasonably necessary for the administration of the Minnesota 

Direct Payment Funds, within a reasonable time after receipt of the request for the 

information. Information pertaining to individual borrowers who may be eligible for 

payments under the Minnesota Direct Payment Funds, including names and other 

identifying information and information necessary to verify or corroborate claims for 

restitution of Minnesota borrowers, shall be provided to Minnesota so long as such 

information is used solely for the purpose of contacting eligible borrowers, responding to 

inquiries from borrowers regarding their eligibility for Minnesota Direct Payment Funds, 

and/or complying with tax reporting and withholding obligations, if any. Appropriate 

information security protocols, including prior borrower authorization where applicable, 

shall be utilized to ensure the privacy of borrower information and compliance with all 

applicable privacy laws.

MISSISSIPPI

The settlement payment for the State of Mississippi in the amount of $13,580.374.00

shall be distributed to the Mississippi Attorney General for disbursements in accordance 

with the terms of the Consent Judgment to which this Exhibit refers.

MISSOURI

The Escrow Agent shall pay $39,583,212 to the State of Missouri:

a. $38,583,212 to the State of Missouri Office of the Attorney General and 

b. $1,000,000 to the state of Missouri Office of the Attorney General to the credit of 

the Merchandising Practices Revolving Fund for advocacy of consumers 

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impacted by the practices addressed in this Consent Judgment, for the 

investigation and prosecution of persons involved in unfair, deceptive and 

fraudulent practices related to financial services, and for such other purposes as 

authorized by law.

MONTANA

Pursuant to ¶ 1(b) of Exhibit B to the foregoing Consent Judgment, the sum of 

$4,858,276 shall be distributed to the state consumer protection account for the Montana 

Department of Justice, according to wire transfer instructions to be provided by the 

Montana Attorney General’s Office to the Trustee. 

The sum of $450,000 shall be for civil fines, costs and fees pursuant to Mont. Code Ann. 

§ 30-14-143.

The remaining funds shall be used, at the sole discretion of the Attorney General of 

Montana, for purposes intended to avoid preventable foreclosures, to ameliorate the 

effects of the foreclosure crisis, and to enhance law enforcement efforts to prevent and 

prosecute financial fraud, or unfair or deceptive acts or practices. These purposes include 

but are not limited to, funding for housing counselors, state and local foreclosure 

assistance services, state and local foreclosure mediation programs, legal assistance, and 

funding for training and staffing of financial fraud or consumer protection enforcement 

efforts.

NEBRASKA

The Nebraska Attorney General, on behalf of the State of Nebraska, directs that 

Nebraska’s portion of the Direct Payment Settlement Amount, pursuant to Exhibit B, 

Paragraph (1)(b) of the attached Consent Judgment, be distributed to the following, to be 

used for any purpose(s) allowed pursuant to said Consent Judgment: State of NebraskaCash Reserve Fund (11000).

NEVADA

Funds shall be directed to the Nevada Attorney General to be deposited into an account 

and used for the following purposes: avoiding preventable foreclosure, ameliorating the 

effects of the mortgage and foreclosure crisis in Nevada, enhance consumer protection 

and legal aid efforts, enhance consumer financial and housing counseling 

assistance including economic education and/or instruction on financial literacy for the 

benefit of Nevada residents, enhance law enforcement efforts to investigate, prosecute 

and prevent financial fraud or unfair or deceptive acts or practices at the sole discretion of 

the Attorney General. The aforementioned account shall be interest bearing and all 

accrued interest shall stay with the account for the above enumerated purposes.

NEW HAMPSHIRE

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The funds received by the New Hampshire Attorney General pursuant to this agreement 

shall be deposited in the consumer escrow account at the Department of Justice and used 

at the sole discretion of the New Hampshire Attorney General for the protection of 

consumers in the State of New Hampshire. The permissible purposes for allocation of the 

funds include, but are not limited to, funding for housing counselors, state and local 

foreclosure assistance programs, state and local foreclosure mediation programs, legal 

assistance, funding for training and staffing of financial fraud and/or consumer protection 

enforcement efforts, supplementing the amounts paid to state homeowners under the 

Borrower Payment Fund, and civil penalties.

NEW JERSEY

New Jersey plans to apply its share of the settlement proceeds for its attorneys’ fees, 

investigation costs and other expenses related to the investigation and resolution of this 

matter as well as on one or more of the following programs: Affordable Housing, Local 

Planning Services, Developmental Disabilities Residential Services, State Rental 

Assistance Program, Homelessness Prevention, Shelter Assistance, Community Based 

Senior Programs, Mental Health Residential Programs, Social Services for the Homeless, 

and/or Temporary Assistance for Needy Families

NEW YORK

The State Payment Settlement Amount for New York, set forth in Exhibit B-1 to this 

Consent Judgment (“New York Settlement”), will be paid to the Office of the Attorney 

General of the State of New York (“NYOAG”) by certified check payable to the State of 

New York, Department of Law and deposited by the NYOAG in an account that may be 

used, as determined by the NYOAG, to address matters relating to housing, lending, 

mortgage defaults, foreclosures, or the mortgage crisis, including without limitation 

consumer assistance, investigation, enforcement operations, litigation, public protection, 

consumer education, or local consumer aid, and for penalties, costs, fees, or any other use 

permitted under law. The New York Settlement shall be disbursed by the NYOAG in its 

sole discretion and at its direction consistent with the terms of this Consent Judgment. The 

certified check shall be delivered to:

New York State Office of the Attorney General 

120 Broadway, 25th Floor

New York, New York 10271-0332

Attn.: Scott Wilson, Senior Advisor and Special Counsel

NEW MEXICO

Funds allocated to the Attorney General of the State of New Mexico shall be expended, 

in the sole discretion of the Attorney General, primarily for programs to avoid 

preventable foreclosures and ameliorate the effects on homeowners of the foreclosure 

crisis, including without limitation, funding for housing counselors, establishment of a 

state foreclosure assistance hotline, state and local foreclosure mediation programs, legal 

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assistance for homeowners facing foreclosure, funding for administrative oversight for 

and coordination of funded programs by the Attorney General, and to enhance law 

enforcement efforts to prevent and prosecute financial fraud or unfair or deceptive acts or 

practices.

NORTH CAROLINA

For the payment of settlement funds pursuant to Paragraph III (3) of the Consent 

Judgment and in accordance with the provisions of Paragraph 1 (b) of Exhibit B to the 

Consent Judgment, North Carolina Attorney General Roy Cooper sets forth the following 

funding allocations for the State of North Carolina’s settlement payment and directs the 

Escrow Agent to pay said funds as follows:

x $5.74 million to be allocated as civil penalties payable to the Civil Penalty and 

Forfeiture Fund pursuant to N.C. Gen. Stat. § 115C-457.2 and Article 9, Section 7 

of the North Carolina Constitution; 

x $30.60 million to the North Carolina Housing Finance Agency for distribution as 

follows: (a) $19.12 million to be allocated to housing counseling providers to 

ensure that North Carolina homeowners receive the benefits due under this 

Consent Judgment, and to ensure the availability of homeownership and 

foreclosure prevention counseling services in North Carolina; (b) $11.47 million 

to be allocated to legal services providers in North Carolina for legal 

representation and assistance to North Carolinians in foreclosure or other housing 

or lending-related matters; 

x $6.69 million to the Conference of District Attorneys of the North Carolina 

Administrative Office of the Courts to administer a program of grants among the 

prosecutorial districts in North Carolina for the purpose of expanding prosecution 

of lending and financial crimes, and expanding prosecution and investigative 

abilities in those areas, and obtaining training relating to lending and financial 

crimes; 

x $2.87 million to the North Carolina State Bureau of Investigation to expand its 

accounting and financial investigative ability and its expertise to investigate 

financial and lending crimes; 

x $4.78 million to the North Carolina Department of Justice to enable its Consumer 

Protection Division to hire attorneys, investigators, financial accountants and 

other specialists and staff as needed in order to increase its efforts to investigate 

and pursue cases related to financial fraud and unfair or deceptive trade practices 

in mortgage lending and financial services, and to assure public awareness of 

consumers’ eligibility for relief under the Consent Judgment and address 

consumer need for information;

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x $8.6 million to the general fund of the State of North Carolina as compensation 

for costs and economic losses sustained by the State due to mortgage fraud and 

foreclosure misconduct. (It is anticipated that an additional $1 million will be 

paid to the general fund of the State of North Carolina in the form of attorneys 

fees.)

To the extent there are funds remaining or unallocated under the allocations set forth 

above, the Escrow Agent is directed to distribute such funds to the North Carolina 

Housing Finance Agency for it to distribute consistent with the purposes outlined above. 

If North Carolina’s settlement payment amount is reduced for unanticipated reasons, the 

individual allocations set forth above will each be reduced by the corresponding 

percentage amount. 

NORTH DAKOTA

The settlement payment to the State of North Dakota shall be paid to the North Dakota 

Attorney General, and shall be used, in the Attorney General’s discretion, to fund housing 

remediation projects designed to create more affordable and available housing or lodging 

in areas where more housing or lodging is needed, including creating available housing or 

lodging for personnel in law enforcement, emergency response, et cetera, and to 

compensate the state for attorney’s fees and costs resulting from the alleged unlawful 

conduct of the Defendants.

OHIO

Ohio’s share of the Direct Payment Settlement Amount shall be distributed and delivered 

to the office of the Ohio Attorney General, and shall be placed in the following two 

funds:

1. $90,783,033.00 in the Attorney General Court Order Fund pursuant to section 

109.111 of the Ohio Revised Code. The funds shall be transferred, distributed, 

disbursed, or allocated for the purposes described in Paragraph 1(b)(i) of Exhibit 

B of the Consent Judgment, including the costs of the Ohio Attorney General in 

administering this settlement and fund. Interest or other income earned on this 

account shall also be transferred, distributed, disbursed, or allocated for the 

purposes described in Paragraph 1(b)(i) of Exhibit B of the Consent Judgment and 

for the costs of the Ohio Attorney General in administering this settlement and 

fund.

2. $2,000,000.00 shall be placed in the Consumer Protection Enforcement Fund 

created pursuant to section 1345.51 of the Ohio Revised Code. The funds shall be 

used for the purposes described in section 1345.51.

OREGON

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1.1 Payment. Servicers shall make available a total sum of Twenty-Nine Million 

Two Hundred Fifty-Three Thousand One Hundred Ninety Dollars ($29,253,190) for 

payment to the State of Oregon, allocated as follows:

(a) Four Million Dollars ($4,000,000) shall be deposited into the Oregon Department 

of Justice Operating Account established pursuant to ORS 180.180.

(b) Twenty-Five Million Two Hundred Fifty-Three Thousand One Hundred Ninety

Dollars ($25,253,190) shall be deposited into the General Fund with a 

recommendation to the Oregon Legislative Assembly that such funds be used for 

housing and foreclosure relief and mitigation as set forth in this Consent 

Judgment.

PENNSYLVANIA

The Attorney General of the Commonwealth of Pennsylvania (“Attorney General”) 

directs that the State Payment Settlement Amount, as that term is used in Exhibit B of 

this Consent Judgment (“Settlement Amount”), be distributed to the Office of Attorney 

General, to be allocated by the Attorney General, at her sole discretion, to the Office of 

Attorney General and the Pennsylvania Department of Banking to further their respective 

educational and law enforcement purposes; and the balance to be allocated by the 

Attorney General, at her sole discretion, to appropriate programs that help Pennsylvania 

homeowners avoid foreclosure. The amount, timing, and manner of the allocation of the 

Settlement Amount shall be at the sole discretion of the Attorney General.

RHODE ISLAND

The Rhode Island Attorney General shall receive all state government designated funds 

paid under this agreement. Said funds shall be held in separate accounts and must be used 

solely for mortgage foreclosure related issues and/or consumer education, outreach, 

training or related consumer issues as determined by the Rhode Island Attorney General

SOUTH CAROLINA

With respect to the State of South Carolina’s payment, said payment shall be used by the 

South Carolina Attorney General for a consumer protection enforcement fund, consumer 

education fund, consumer litigation fund, local consumer aid fund, or revolving fund; for 

consumer restitution, including the administrative costs thereof; for attorneys’ fees and 

other costs of investigation and litigation; for reimbursement of state agencies; for cy pres 

purposes; or for any other uses not prohibited by law. The South Carolina Attorney 

General shall have sole discretion over the distribution of the funds.

SOUTH DAKOTA

Said payment shall be used by the Attorneys General for attorney fees and other costs of 

investigation and litigation, or to be placed in, or applied to, the consumer protection 

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enforcement fund, consumer education or litigation, to defray the costs of the inquiry 

leading hereto, or may be used to fund or assist in funding housing counselor programs, 

foreclosure assistance personnel, foreclosure mediation programs, legal assistance and 

funding for training and staffing of financial fraud or consumer protection enforcement 

efforts, civil penalties or for other uses permitted by state law, at the sole discretion of the 

Attorney General

TENNESSEE

The settlement amount of $41,207,810.00 shall be paid for the benefit of the citizens of 

the State of Tennessee, of which the maximum of 10%, or $4,120,781.00, shall be paid to 

the general fund of the State of Tennessee as a civil penalty. The remaining 

$37,087,029.00 shall be paid to the Office of the Attorney General of Tennessee and shall 

be used for purposes consistent with applicable provisions of the consent judgment as 

directed by the Office of the Attorney General, including funding foreclosure prevention 

counseling, other housing and legal assistance programs, related compliance, 

investigative, enforcement, and education purposes, or to fund other programs reasonably 

targeted to housing or tenant issues.

TEXAS

Said payment to the State of Texas in the amount of One Hundred Thirty-Four Million, 

Six Hundred Twenty-Eight Thousand, Four Hundred Eighty-Nine Dollars 

($134,628,489.00) shall be allocated as follows:

A. Ten Million Dollars ($10,000,000.00) for civil penalties pursuant to Tex. Bus. & 

Com. Code §17.47(c) paid to the State of Texas for deposit to the judicial fund 

pursuant to Texas Government Code §402.007;

B. One Hundred Twenty-Four Million, Six Hundred Twenty-Eight Thousand, Four 

Hundred Eighty-Nine Dollars ($124,628,489.00) paid to the State of Texas for 

deposit into the General Revenue Fund pursuant to Texas Government Code 

§404.094(b) and §404.097(c).

UTAH

The Attorney General of the State of Utah directs that the Utah portion of the State 

Payment Settlement Amounts, as that term is used in Exhibit B of this Consent Judgment, 

be distributed to the State of Utah to be further allocated as determined by the Utah State 

Legislature.

VERMONT

The state funds may be used for housing-related or other purposes.

VIRGINIA

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B2-19

The State Payment Settlement Amount for Virginia totaling $66,525,233 shall be 

provided to the Virginia Attorney General for deposit to the Attorney General's 

Regulatory, Consumer Advocacy, Litigation and Enforcement Revolving Trust Fund (the 

"Revolving Fund"). Amounts deposited to the Revolving Fund may be used for costs of 

the Attorney General associated with his consumer protection advocacy and enforcement 

efforts and other delineated purposes permitted by State law.

WASHINGTON

The State of Washington will use its share of the State Payment Settlement Amount, as 

follows:

1. Ten percent will be designated as a civil penalty.

2. No more than $5 million will be used to compensate the State for its costs and 

fees to date, for costs of monitoring and enforcing the terms of the settlement, and 

for enforcing RCW 19.86, the Consumer Protection Act. 

3. The remaining amount will be used for purposes intended to avoid preventable 

foreclosures or ameliorate the effects of the foreclosure crisis. As permitted by the 

Consent Judgment, such uses may include

a. supplementing the amounts paid to state homeowners under the Borrower 

Payment Fund; 

b. funding for housing counselors;

c. funding for state and local foreclosure assistance hotlines;

d. funding for state and local foreclosure mediation programs;

e. funding for civil legal assistance; or

f. funding for housing remediation and anti-blight projects.

The State of Washington will convene a committee of public and private stakeholders 

who are experienced in foreclosure assistance, mortgage lending, civil legal services or 

housing related issues to determine how best to use the funds. As required by the 

Consent Judgment, the Attorney General will exercise his discretion over the final 

disposition of the funds in accordance with the purposes as set forth in the Consent 

Judgment and will provide instructions to the Escrow Agent accordingly.

WEST VIRGINIA

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B2-20

Settlement payments to the State of West Virginia in the amount of $5,748,915.00 shall 

be placed in trust and used at the discretion of the Attorney General solely for consumer 

protection purposes, including but not limited to, direct payments, restitution, consumer 

education, legal services, credit or bankruptcy counseling and education, housing 

counseling, conflict resolution programs, and costs associated with implementing court 

orders.

WISCONSIN

Money owed to the State of Wisconsin shall be made payable to ‘Attorney General, State 

of Wisconsin,’ and may be used for any purpose permitted under the Consent Judgment, 

as solely determined and directed by the Attorney General.

WYOMING

The Escrow Agent shall distribute the amount constituting the State Payment Settlement

Amount for the State of Wyoming to the Attorney General of the State of Wyoming, as

trustee, to hold and distribute such amount, pursuant to Wyoming Statute § 9-1-

639(a)(i), exclusively for the purpose of addressing mortgage and foreclosure

matters in the State of Wyoming, by providing grants or other aid to agencies and

organizations approved by the Attorney General of the State of Wyoming for mortgage

and housing related consumer assistance, consumer education, credit counseling,

mediation programs, legal assistance, training, or staffing.

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GARCIA 04346
EXHIBIT C

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GARCIA 04347
BORROWER PAYMENT AMOUNT

1. The Borrower Payment Amount shall be administered under the direction and 

control of the State members of the Monitoring Committee in the following manner.

2. Within ninety (90) days of the Effective Date of this Consent Judgment, the State 

members of the Monitoring Committee shall choose and retain a Settlement Administrator (“the 

Administrator”) to administer the distribution of cash payments to individual borrowers under 

this and all similar Consent Judgments with other servicers concerning the Covered Conduct (the 

“Related Consent Judgments”). All costs and expenses of the Administrator, including taxes, 

shall be paid from the Borrower Payment Amount.

3. Defendant shall provide to the Administrator all information already in its 

possession and readily available that is reasonably necessary for the administration of this and 

the Related Consent Judgments, within a reasonable time after receipt of the request for 

information. Defendant is ordered herein to provide such information under 15 U.S.C. § 

6802(e)(1)(A), (5) and (8) of the Gramm-Leach-Bliley Act. Such information pertaining to 

individual eligible Borrowers, including names and other identifying information, may be 

provided to individual states, but only if the information is used solely for the purpose of 

contacting eligible Borrowers, responding to inquiries from Borrowers regarding their eligibility 

or concerning the award of borrower payments under this Consent Judgment, and/or complying 

with tax reporting and withholding obligations, if any. The Administrator shall utilize 

appropriate information security protocols to ensure the privacy of Borrower information and 

otherwise comply with all applicable privacy laws. After the completion of the Borrower 

Payment process, the Administrator shall provide a report to each Defendant identifying which 

borrowers have received payment. In addition, Defendant may request from the Administrator

Case 1:12-cv-00361-RMC Document 1-2 Filed 03/12/12 Page 167 of 314 Case 1:12-cv-00361-RMC Document 14-1 Filed 04/04/12 Page 76 of 223

GARCIA 04348
C-2

such interim reports as may be deemed reasonable by the State Members of the Monitoring 

Committee. Interim reports necessary to insure that Borrowers will not receive duplicate 

payments by virtue of litigation, the foreclosure review required by federal banking agencies or 

otherwise hereby are deemed reasonable. Defendant shall warrant to the State Members of the 

Monitoring Committee at the time of supplying information to the Administrator that the 

information is complete and accurate to the best of its knowledge and capability. 

4. The Administrator shall permit reasonable onsite inspection by the State members 

of the Monitoring Committee on the premises of the Administrator to monitor administration of 

this and all Related Consent Judgments.

5. As a condition to receipt of any payments pursuant to this process, borrowers 

must agree that such payment shall offset and operate to reduce any other obligation Defendant 

has to the borrowers to provide compensation or other payments. However, borrowers shall not 

be required to release or waive any other right or legal claim as a condition of receiving such 

payments. 

6. Any cash payment to individual borrowers awarded under the terms of this 

Consent Judgment is not and shall not be considered as forgiven debt. 

7. The purposes of the payments described in this Exhibit C are remedial and relate 

to the reduction in the proceeds deemed realized by borrowers for tax purposes from the 

foreclosure sale of residential properties owned by the borrowers allegedly resulting from the 

allegedly unlawful conduct of the Defendants.

Case 1:12-cv-00361-RMC Document 1-2 Filed 03/12/12 Page 168 of 314 Case 1:12-cv-00361-RMC Document 14-1 Filed 04/04/12 Page 77 of 223

GARCIA 04349
EXHIBIT D

Case 1:12-cv-00361-RMC Document 1-2 Filed 03/12/12 Page 169 of 314 Case 1:12-cv-00361-RMC Document 14-1 Filed 04/04/12 Page 78 of 223

GARCIA 04350
Consumer Relief Requirements

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Case 1:12-cv-00361-RMC Document 1-2 Filed 03/12/12 Page 171 of 314 Case 1:12-cv-00361-RMC Document 14-1 Filed 04/04/12 Page 80 of 223

GARCIA 04352
 

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Case 1:12-cv-00361-RMC Document 1-2 Filed 03/12/12 Page 172 of 314 Case 1:12-cv-00361-RMC Document 14-1 Filed 04/04/12 Page 81 of 223

GARCIA 04353
 

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Case 1:12-cv-00361-RMC Document 1-2 Filed 03/12/12 Page 173 of 314 Case 1:12-cv-00361-RMC Document 14-1 Filed 04/04/12 Page 82 of 223

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GARCIA 04362
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Case 1:12-cv-00361-RMC Document 1-2 Filed 03/12/12 Page 182 of 314 Case 1:12-cv-00361-RMC Document 14-1 Filed 04/04/12 Page 91 of 223

GARCIA 04363
Table 11

Menu Item Credit Towards Settlement Credit Cap

Consumer Relief Funds

1. First Lien Mortgage 

Modification2

3257)2/,2/2$16

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Case 1:12-cv-00361-RMC Document 1-2 Filed 03/12/12 Page 183 of 314 Case 1:12-cv-00361-RMC Document 14-1 Filed 04/04/12 Page 92 of 223

GARCIA 04364
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Case 1:12-cv-00361-RMC Document 1-2 Filed 03/12/12 Page 184 of 314 Case 1:12-cv-00361-RMC Document 14-1 Filed 04/04/12 Page 93 of 223

GARCIA 04365
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Case 1:12-cv-00361-RMC Document 1-2 Filed 03/12/12 Page 185 of 314 Case 1:12-cv-00361-RMC Document 14-1 Filed 04/04/12 Page 94 of 223

GARCIA 04366
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6. Forbearance for unemployed 

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GARCIA 04367
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GARCIA 04368
EXHIBIT E

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GARCIA 04369
Enforcement Terms

A. Implementation Timeline. Servicer anticipates that it will phase in the 

implementation of the Servicing Standards and Mandatory Relief Requirements 

(i) through (iv), as described in Section C.12, using a grid approach that 

prioritizes implementation based upon: (i) the importance of the Servicing 

Standard to the borrower; and (ii) the difficulty of implementing the Servicing 

Standard. In addition to the Servicing Standards and any Mandatory Relief 

Requirements that have been implemented upon entry of this Consent Judgment, 

the periods for implementation will be: (a) within 60 days of entry of this 

Consent Judgment; (b) within 90 days of entry of this Consent Judgment; and (c) 

within 180 days of entry of this Consent Judgment. Servicer will agree with the 

Monitor chosen pursuant to Section C, below, on the timetable in which the 

Servicing Standards and Mandatory Relief Requirements (i) through (iv) will be 

implemented. In the event that Servicer, using reasonable efforts, is unable to 

implement certain of the standards on the specified timetable, Servicer may apply 

to the Monitor for a reasonable extension of time to implement those standards or 

requirements. 

B. Monitoring Committee. A committee comprising representatives of the state 

Attorneys General, State Financial Regulators, the U.S. Department of Justice, 

and the U.S. Department of Housing and Urban Development shall monitor 

Servicer’s compliance with this Consent Judgment (the “Monitoring Committee”). 

The Monitoring Committee may substitute representation, as necessary. Subject 

to Section F, the Monitoring Committee may share all Monitor Reports, as that 

term is defined in Section D.2 below, with any releasing party.

C. Monitor

Retention and Qualifications and Standard of Conduct

1. Pursuant to an agreement of the parties, Joseph A. Smith Jr. is appointed 

to the position of Monitor under this Consent Judgment. If the Monitor is 

at any time unable to complete his or her duties under this Consent 

Judgment, Servicer and the Monitoring Committee shall mutually agree 

upon a replacement in accordance with the process and standards set forth 

in Section C of this Consent Judgment.

2. Such Monitor shall be highly competent and highly respected, with a 

reputation that will garner public confidence in his or her ability to 

perform the tasks required under this Consent Judgment. The Monitor 

shall have the right to employ an accounting firm or firms or other firm(s) 

with similar capabilities to support the Monitor in carrying out his or her 

duties under this Consent Judgment. Monitor and Servicer shall agree on 

the selection of a “Primary Professional Firm,” which must have adequate 

capacity and resources to perform the work required under this agreement. 

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The Monitor shall also have the right to engage one or more attorneys or 

other professional persons to represent or assist the Monitor in carrying 

out the Monitor’s duties under this Consent Judgment (each such 

individual, along with each individual deployed to the engagement by the 

Primary Professional Firm, shall be defined as a “Professional”). The 

Monitor and Professionals will collectively possess expertise in the areas 

of mortgage servicing, loss mitigation, business operations, compliance, 

internal controls, accounting, and foreclosure and bankruptcy law and 

practice. The Monitor and Professionals shall at all times act in good faith 

and with integrity and fairness towards all the Parties.

3. The Monitor and Professionals shall not have any prior relationships with 

the Parties that would undermine public confidence in the objectivity of

their work and, subject to Section C.3(e), below, shall not have any 

conflicts of interest with any Party.

(a) The Monitor and Professionals will disclose, and will make a 

reasonable inquiry to discover, any known current or prior 

relationships to, or conflicts with, any Party, any Party’s holding 

company, any subsidiaries of the Party or its holding company, 

directors, officers, and law firms.

(b) The Monitor and Professionals shall make a reasonable inquiry to 

determine whether there are any facts that a reasonable individual 

would consider likely to create a conflict of interest for the 

Monitor or Professionals. The Monitor and Professionals shall 

disclose any conflict of interest with respect to any Party.

(c) The duty to disclose a conflict of interest or relationship pursuant 

to this Section C.3 shall remain ongoing throughout the course of 

the Monitor’s and Professionals’ work in connection with this 

Consent Judgment. 

(d) All Professionals shall comply with all applicable standards of 

professional conduct, including ethics rules and rules pertaining to 

conflicts of interest.

(e) To the extent permitted under prevailing professional standards, a 

Professional’s conflict of interest may be waived by written 

agreement of the Monitor and Servicer.

(f) Servicer or the Monitoring Committee may move the Court for an 

order disqualifying any Professionals on the grounds that such 

Professional has a conflict of interest that has inhibited or could 

inhibit the Professional’s ability to act in good faith and with 

integrity and fairness towards all Parties. 

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GARCIA 04371
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4. The Monitor must agree not to be retained by any Party, or its successors 

or assigns, for a period of 2 years after the conclusion of the terms of the 

engagement. Any Professionals who work on the engagement must agree 

not to work on behalf of Servicer, or its successor or assigns, for a period 

of 1 year after the conclusion of the term of the engagement (the 

“Professional Exclusion Period”). Any Firm that performs work with 

respect to Servicer on the engagement must agree not to perform work on 

behalf of Servicer, or its successor or assigns, that consists of advising 

Servicer on a response to the Monitor’s review during the engagement and 

for a period of six months after the conclusion of the term of the 

engagement (the “Firm Exclusion Period”). The Professional Exclusion 

Period and Firm Exclusion Period, and terms of exclusion may be altered 

on a case-by-case basis upon written agreement of Servicer and the 

Monitor. The Monitor shall organize the work of any Firms so as to 

minimize the potential for any appearance of, or actual, conflicts.

Monitor’s Responsibilities

5. It shall be the responsibility of the Monitor to determine whether Servicer 

is in compliance with the Servicing Standards and the Mandatory Relief 

Requirements (as defined in Section C.12) and whether Servicer has 

satisfied the Consumer Relief Requirements, in accordance with the 

authorities provided herein and to report his or her findings as provided in 

Section D.3, below.

6. The manner in which the Monitor will carry out his or her compliance 

responsibilities under this Consent Judgment and, where applicable, the 

methodologies to be utilized shall be set forth in a work plan agreed upon 

by Servicer and the Monitor, and not objected to by the Monitoring 

Committee (the “Work Plan”).

Internal Review Group

7. Servicer will designate an internal quality control group that is 

independent from the line of business whose performance is being 

measured (the “Internal Review Group”) to perform compliance reviews 

each calendar quarter (“Quarter”) in accordance with the terms and 

conditions of the Work Plan (the “Compliance Reviews”) and satisfaction 

of the Consumer Relief Requirements after the (A) end of each calendar 

year (and, in the discretion of the Servicer, any Quarter) and (B) earlier of 

the Servicer assertion that it has satisfied its obligations thereunder and the 

third anniversary of the Start Date (the “Satisfaction Review”). For the 

purposes of this provision, a group that is independent from the line of 

business shall be one that does not perform operational work on mortgage 

servicing, and ultimately reports to a Chief Risk Officer, Chief Audit 

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GARCIA 04372
E-4

Executive, Chief Compliance Officer, or another employee or manager 

who has no direct operational responsibility for mortgage servicing.

8. The Internal Review Group shall have the appropriate authority, privileges, 

and knowledge to effectively implement and conduct the reviews and 

metric assessments contemplated herein and under the terms and 

conditions of the Work Plan.

9. The Internal Review Group shall have personnel skilled at evaluating and 

validating processes, decisions, and documentation utilized through the 

implementation of the Servicing Standards. The Internal Review Group 

may include non-employee consultants or contractors working at 

Servicer’s direction.

10. The qualifications and performance of the Internal Review Group will be 

subject to ongoing review by the Monitor. Servicer will appropriately 

remediate the reasonable concerns of the Monitor as to the qualifications 

or performance of the Internal Review Group.

Work Plan

11. Servicer’s compliance with the Servicing Standards shall be assessed via 

metrics identified and defined in Schedule E-1 hereto (as supplemented 

from time to time in accordance with Sections C.12 and C.23, below, the 

“Metrics”). The threshold error rates for the Metrics are set forth in 

Schedule E-1 (as supplemented from time to time in accordance with 

Sections C.12 and C.23, below, the “Threshold Error Rates”). The 

Internal Review Group shall perform test work to compute the Metrics 

each Quarter, and report the results of that analysis via the Compliance 

Reviews. The Internal Review Group shall perform test work to assess the 

satisfaction of the Consumer Relief Requirements within 45 days after the 

(A) end of each calendar year (and, in the discretion of the Servicer, any 

Quarter) and (B) earlier of (i) the end of the Quarter in which Servicer 

asserts that it has satisfied its obligations under the Consumer Relief 

Provisions and (ii) the Quarter during which the third anniversary of the 

Start Date occurs, and report that analysis via the Satisfaction Review.

12. In addition to the process provided under Sections C.23 and 24, at any 

time after the Monitor is selected, the Monitor may add up to three 

additional Metrics and associated Threshold Error Rates, all of which 

(a) must be similar to the Metrics and associated Threshold Error Rates 

contained in Schedule E-1, (b) must relate to material terms of the 

Servicing Standards, or the following obligations of Servicer: (i) after the 

Servicer asserts that it has satisfied its obligation to provide a refinancing 

program under the framework of the Consumer Relief Requirements

(“Framework”), to provide notification to eligible borrowers indicating 

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GARCIA 04373
E-5

that such borrowers may refinance under the refinancing program 

described in the Framework, (ii) to make the Refinancing Program 

available to all borrowers fitting the minimum eligibility criteria described 

in 9.a of the Framework, (iii) when the Servicer owns the second lien 

mortgage, to modify the second lien mortgage when a Participating 

Servicer (as defined in the Framework) reduces principal on the related 

first lien mortgage, as described in the Framework, (iv) with regard to 

servicer-owned first liens, to waive the deficiency amounts less than 

$250,000 if an Eligible Servicemember qualifies for a short sale under the 

Framework and sells his or her principal residence in a short sale 

conducted in accordance with Servicer’s then customary short sale process,

or (v) without prejudice to the implementation of pilot programs in 

particular geographic areas, to implement the Framework requirements 

through policies that are not intended to disfavor a specific geography 

within or among states that are a party to the Consent Judgment or 

discriminate against any protected class of borrowers (collectively, the 

obligations described in (i) through (v) are hereinafter referred to as the 

“Mandatory Relief Requirements”), (c) must either (i) be outcomes-based 

(but no outcome-based Metric shall be added with respect to any 

Mandatory Relief Requirement) or (ii) require the existence of policies 

and procedures implementing any of the Mandatory Relief Requirements 

or any material term of the Servicing Standards, in a manner similar to 

Metrics 5.B-E, and (d) must be distinct from, and not overlap with, any 

other Metric or Metrics. In consultation with Servicer and the Monitoring 

Committee, Schedule E-1 shall be amended by the Monitor to include the 

additional Metrics and Threshold Error Rates as provided for herein, and 

an appropriate timeline for implementation of the Metric shall be 

determined. 

13. Servicer and the Monitor shall reach agreement on the terms of the Work 

Plan within 90 days of the Monitor’s appointment, which time can be 

extended for good cause by agreement of Servicer and the Monitor. If 

such Work Plan is not objected to by the Monitoring Committee within 20 

days, the Monitor shall proceed to implement the Work Plan. In the event 

that Servicer and the Monitor cannot agree on the terms of the Work Plan 

within 90 days or the agreed upon terms are not acceptable to the 

Monitoring Committee, Servicer and Monitoring Committee or the 

Monitor shall jointly petition the Court to resolve any disputes. If the 

Court does not resolve such disputes, then the Parties shall submit all 

remaining disputes to binding arbitration before a panel of three arbitrators. 

Each of Servicer and the Monitoring Committee shall appoint one 

arbitrator, and those two arbitrators shall appoint a third.

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GARCIA 04374
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14. The Work Plan may be modified from time to time by agreement of the 

Monitor and Servicer. If such amendment to the Work Plan is not 

objected to by the Monitoring Committee within 20 days, the Monitor 

shall proceed to implement the amendment to the Work Plan. To the 

extent possible, the Monitor shall endeavor to apply the Servicing 

Standards uniformly across all Servicers.

15. The following general principles shall provide a framework for the 

formulation of the Work Plan:

(a) The Work Plan will set forth the testing methods and agreed 

procedures that will be used by the Internal Review Group to 

perform the test work and compute the Metrics for each Quarter.

(b) The Work Plan will set forth the testing methods and agreed 

procedures that will be used by Servicer to report on its 

compliance with the Consumer Relief Requirements of this 

Consent Judgment, including, incidental to any other testing, 

confirmation of state-identifying information used by Servicer to 

compile state-level Consumer Relief information as required by 

Section D.2.

(c) The Work Plan will set forth the testing methods and procedures 

that the Monitor will use to assess Servicer’s reporting on its 

compliance with the Consumer Relief Requirements of this 

Consent Judgment. 

(d) The Work Plan will set forth the methodology and procedures the 

Monitor will utilize to review the testing work performed by the 

Internal Review Group.

(e) The Compliance Reviews and the Satisfaction Review may include 

a variety of audit techniques that are based on an appropriate 

sampling process and random and risk-based selection criteria, as 

appropriate and as set forth in the Work Plan.

(f) In formulating, implementing, and amending the Work Plan, 

Servicer and the Monitor may consider any relevant information 

relating to patterns in complaints by borrowers, issues or 

deficiencies reported to the Monitor with respect to the Servicing 

Standards, and the results of prior Compliance Reviews.

(g) The Work Plan should ensure that Compliance Reviews are 

commensurate with the size, complexity, and risk associated with 

the Servicing Standard being evaluated by the Metric.

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GARCIA 04375
E-7

(h) Following implementation of the Work Plan, Servicer shall be 

required to compile each Metric beginning in the first full Quarter 

after the period for implementing the Servicing Standards 

associated with the Metric, or any extension approved by the 

Monitor in accordance with Section A, has run.

Monitor’s Access to Information

16. So that the Monitor may determine whether Servicer is in compliance with 

the Servicing Standards and Mandatory Relief Requirements, Servicer 

shall provide the Monitor with its regularly prepared business reports 

analyzing Executive Office servicing complaints (or the equivalent); 

access to all Executive Office servicing complaints (or the equivalent) 

(with appropriate redactions of borrower information other than borrower 

name and contact information to comply with privacy requirements); and, 

if Servicer tracks additional servicing complaints, quarterly information 

identifying the three most common servicing complaints received outside 

of the Executive Office complaint process (or the equivalent). In the event 

that Servicer substantially changes its escalation standards or process for 

receiving Executive Office servicing complaints (or the equivalent), 

Servicer shall ensure that the Monitor has access to comparable 

information. 

17. So that the Monitor may determine whether Servicer is in compliance with 

the Servicing Standards and Mandatory Relief Requirements, Servicer 

shall notify the Monitor promptly if Servicer becomes aware of reliable 

information indicating Servicer is engaged in a significant pattern or 

practice of noncompliance with a material aspect of the Servicing 

Standards or Mandatory Relief Requirements. 

18. Servicer shall provide the Monitor with access to all work papers prepared 

by the Internal Review Group in connection with determining compliance 

with the Metrics or satisfaction of the Consumer Relief Requirements in 

accordance with the Work Plan.

19. If the Monitor becomes aware of facts or information that lead the Monitor 

to reasonably conclude that Servicer may be engaged in a pattern of 

noncompliance with a material term of the Servicing Standards that is 

reasonably likely to cause harm to borrowers or with any of the Mandatory 

Relief Requirements, the Monitor shall engage Servicer in a review to 

determine if the facts are accurate or the information is correct. 

20. Where reasonably necessary in fulfilling the Monitor’s responsibilities 

under the Work Plan to assess compliance with the Metrics or the 

satisfaction of the Consumer Relief Requirements, the Monitor may 

request information from Servicer in addition to that provided under 

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GARCIA 04376
E-8

Sections C.16-19. Servicer shall provide the requested information in a 

format agreed upon between Servicer and the Monitor. 

21. Where reasonably necessary in fulfilling the Monitor’s responsibilities 

under the Work Plan to assess compliance with the Metrics or the 

satisfaction of the Consumer Relief Requirements, the Monitor may 

interview Servicer’s employees and agents, provided that the interviews 

shall be limited to matters related to Servicer’s compliance with the 

Metrics or the Consumer Relief Requirements, and that Servicer shall be 

given reasonable notice of such interviews.

Monitor’s Powers

22. Where the Monitor reasonably determines that the Internal Review 

Group’s work cannot be relied upon or that the Internal Review Group did 

not correctly implement the Work Plan in some material respect, the 

Monitor may direct that the work on the Metrics (or parts thereof) be 

reviewed by Professionals or a third party other than the Internal Review 

Group, and that supplemental work be performed as necessary.

23. If the Monitor becomes aware of facts or information that lead the Monitor 

to reasonably conclude that Servicer may be engaged in a pattern of 

noncompliance with a material term of the Servicing Standards that is 

reasonably likely to cause harm to borrowers or tenants residing in 

foreclosed properties or with any of the Mandatory Relief Requirements, 

the Monitor shall engage Servicer in a review to determine if the facts are 

accurate or the information is correct. If after that review, the Monitor 

reasonably concludes that such a pattern exists and is reasonably likely to 

cause material harm to borrowers or tenants residing in foreclosed 

properties, the Monitor may propose an additional Metric and associated 

Threshold Error Rate relating to Servicer’s compliance with the associated 

term or requirement. Any additional Metrics and associated Threshold 

Error Rates (a) must be similar to the Metrics and associated Threshold 

Error Rates contained in Schedule E-1, (b) must relate to material terms of 

the Servicing Standards or one of the Mandatory Relief Requirements,

(c) must either (i) be outcomes-based (but no outcome-based Metric shall 

be added with respect to any Mandatory Relief Requirement) or (ii) 

require the existence of policies and procedures required by the Servicing 

Standards or the Mandatory Relief Requirements, in a manner similar to 

Metrics 5.B-E, and (d) must be distinct from, and not overlap with, any 

other Metric or Metrics. Notwithstanding the foregoing, the Monitor may 

add a Metric that satisfies (a)-(c) but does not satisfy (d) of the preceding 

sentence if the Monitor first asks the Servicer to propose, and then 

implement, a Corrective Action Plan, as defined below, for the material 

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GARCIA 04377
E-9

term of the Servicing Standards with which there is a pattern of 

noncompliance and that is reasonably likely to cause material harm to 

borrowers or tenants residing in foreclosed properties, and the Servicer 

fails to implement the Corrective Action Plan according to the timeline 

agreed to with the Monitor.

24. If Monitor proposes an additional Metric and associated Threshold Error 

Rate pursuant to Section C.23, above, Monitor, the Monitoring Committee, 

and Servicer shall agree on amendments to Schedule E-1 to include the 

additional Metrics and Threshold Error Rates provided for in Section C.23, 

above, and an appropriate timeline for implementation of the Metric. If 

Servicer does not timely agree to such additions, any associated 

amendments to the Work Plan, or the implementation schedule, the 

Monitor may petition the court for such additions.

25. Any additional Metric proposed by the Monitor pursuant to the processes 

in Sections C.12, C.23, or C.24 and relating to provision VIII.B.1 of the 

Servicing Standards shall be limited to Servicer’s performance of its 

obligations to comply with (1) the federal Protecting Tenants at 

Foreclosure Act and state laws that provide comparable protections to 

tenants of foreclosed properties; (2) state laws that govern relocation 

assistance payments to tenants (“cash for keys”); and (3) state laws that 

govern the return of security deposits to tenants.

D. Reporting

Quarterly Reports

1. Following the end of each Quarter, Servicer will report the results of its 

Compliance Reviews for that Quarter (the “Quarterly Report”). The 

Quarterly Report shall include: (i) the Metrics for that Quarter; (ii) 

Servicer’s progress toward meeting its payment obligations under this 

Consent Judgment; (iii) general statistical data on Servicer’s overall 

servicing performance described in Schedule Y. Except where an 

extension is granted by the Monitor, Quarterly Reports shall be due no 

later than 45 days following the end of the Quarter and shall be provided 

to: (1) the Monitor, and (2) the Board of Servicer or a committee of the 

Board designated by Servicer. The first Quarterly Report shall cover the 

first full Quarter after this Consent Judgment is entered.

2. Following the end of each Quarter, Servicer will transmit to each state a 

report (the “State Report”) including general statistical data on Servicer’s 

servicing performance, such as aggregate and state-specific information 

regarding the number of borrowers assisted and credited activities 

conducted pursuant to the Consumer Relief Requirements, as described in 

Schedule Y. The State Report will be delivered simultaneous with the 

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GARCIA 04378
E-10

submission of the Quarterly Report to the Monitor. Servicer shall provide 

copies of such State Reports to the Monitor and Monitoring Committee. 

Monitor Reports

3. The Monitor shall report on Servicer’s compliance with this Consent 

Judgment in periodic reports setting forth his or her findings (the “Monitor 

Reports”). The first three Monitor Reports will each cover two Quarterly 

Reports. If the first three Monitor Reports do not find Potential Violations 

(as defined in Section E.1, below), each successive Monitor Report will 

cover four Quarterly Reports, unless and until a Quarterly Report reveals a 

Potential Violation (as defined in Section E.1, below). In the case of a 

Potential Violation, the Monitor may (but retains the discretion not to) 

submit a Monitor Report after the filing of each of the next two Quarterly 

Reports, provided, however, that such additional Monitor Report(s) shall 

be limited in scope to the Metric or Metrics as to which a Potential 

Violation has occurred.

4. Prior to issuing any Monitor Report, the Monitor shall confer with 

Servicer and the Monitoring Committee regarding its preliminary findings 

and the reasons for those findings. Servicer shall have the right to submit 

written comments to the Monitor, which shall be appended to the final 

version of the Monitor Report. Final versions of each Monitor Report 

shall be provided simultaneously to the Monitoring Committee and 

Servicers within a reasonable time after conferring regarding the 

Monitor’s findings. The Monitor Reports shall be filed with the Court 

overseeing this Consent Judgment and shall also be provided to the Board

of Servicer or a committee of the Board designated by Servicer.

5. The Monitor Report shall: (i) describe the work performed by the Monitor 

and any findings made by the Monitor’s during the relevant period, (ii) list 

the Metrics and Threshold Error Rates, (iii) list the Metrics, if any, where 

the Threshold Error Rates have been exceeded, (iv) state whether a 

Potential Violation has occurred and explain the nature of the Potential 

Violation, and (v) state whether any Potential Violation has been cured. In 

addition, following each Satisfaction Review, the Monitor Report shall 

report on the Servicer’s satisfaction of the Consumer Relief Requirements, 

including regarding the number of borrowers assisted and credited 

activities conducted pursuant to the Consumer Relief Requirements, and 

identify any material inaccuracies identified in prior State Reports. Except 

as otherwise provided herein, the Monitor Report may be used in any 

court hearing, trial, or other proceeding brought pursuant to this Consent 

Judgment pursuant to Section J, below, and shall be admissible in 

evidence in a proceeding brought under this Consent Judgment pursuant to 

Section J, below. Such admissibility shall not prejudice Servicer’s right 

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and ability to challenge the findings and/or the statements in the Monitor 

Report as flawed, lacking in probative value or otherwise. The Monitor 

Report with respect to a particular Potential Violation shall not be 

admissible or used for any purpose if Servicer cures the Potential 

Violation pursuant to Section E, below.

Satisfaction of Payment Obligations

6. Upon the satisfaction of any category of payment obligation under this 

Consent Judgment, Servicer, at its discretion, may request that the Monitor 

certify that Servicer has discharged such obligation. Provided that the 

Monitor is satisfied that Servicer has met the obligation, the Monitor may 

not withhold and must provide the requested certification. Any 

subsequent Monitor Report shall not include a review of Servicer’s 

compliance with that category of payment obligation.

Compensation

7. Within 120 days of entry of this Consent Judgment, the Monitor shall, in 

consultation with the Monitoring Committee and Servicer, prepare and 

present to Monitoring Committee and Servicer an annual budget providing 

its reasonable best estimate of all fees and expenses of the Monitor to be 

incurred during the first year of the term of this Consent Judgment, 

including the fees and expenses of Professionals and support staff (the 

“Monitoring Budget”). On a yearly basis thereafter, the Monitor shall 

prepare an updated Monitoring Budget providing its reasonable best 

estimate of all fees and expenses to be incurred during that year. Absent 

an objection within 20 days, a Monitoring Budget or updated Monitoring 

Budget shall be implemented. Consistent with the Monitoring Budget, 

Servicer shall pay all fees and expenses of the Monitor, including the fees 

and expenses of Professionals and support staff. The fees, expenses, and 

costs of the Monitor, Professionals, and support staff shall be reasonable. 

Servicer may apply to the Court to reduce or disallow fees, expenses, or 

costs that are unreasonable.

E. Potential Violations and Right to Cure

1. A “Potential Violation” of this Consent Judgment occurs if the Servicer 

has exceeded the Threshold Error Rate set for a Metric in a given Quarter. 

In the event of a Potential Violation, Servicer shall meet and confer with 

the Monitoring Committee within 15 days of the Quarterly Report or 

Monitor Report indicating such Potential Violation.

2. Servicer shall have a right to cure any Potential Violation.

3. Subject to Section E.4, a Potential Violation is cured if (a) a corrective 

action plan approved by the Monitor (the “Corrective Action Plan”) is 

determined by the Monitor to have been satisfactorily completed in 

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accordance with the terms thereof; and (b) a Quarterly Report covering the 

Cure Period reflects that the Threshold Error Rate has not been exceeded 

with respect to the same Metric and the Monitor confirms the accuracy of 

said report using his or her ordinary testing procedures. The Cure Period 

shall be the first full quarter after completion of the Corrective Action Plan 

or, if the completion of the Corrective Action Plan occurs within the first 

month of a Quarter and if the Monitor determines that there is sufficient 

time remaining, the period between completion of the Corrective Action 

Plan and the end of that Quarter.

4. If after Servicer cures a Potential Violation pursuant to the previous 

section, another violation occurs with respect to the same Metric, then the 

second Potential Violation shall immediately constitute an uncured 

violation for purposes of Section J.3, provided, however, that such second 

Potential Violation occurs in either the Cure Period or the quarter 

immediately following the Cure Period.

5. In addition to the Servicer’s obligation to cure a Potential Violation 

through the Corrective Action Plan, Servicer must remediate any material 

harm to particular borrowers identified through work conducted under the 

Work Plan. In the event that a Servicer has a Potential Violation that so 

far exceeds the Threshold Error Rate for a metric that the Monitor 

concludes that the error is widespread, Servicer shall, under the 

supervision of the Monitor, identify other borrowers who may have been 

harmed by such noncompliance and remediate all such harms to the extent 

that the harm has not been otherwise remediated.

6. In the event a Potential Violation is cured as provided in Sections E.3, 

above, then no Party shall have any remedy under this Consent Judgment

(other than the remedies in Section E.5) with respect to such Potential 

Violation.

F. Confidentiality

1. These provisions shall govern the use and disclosure of any and all 

information designated as “CONFIDENTIAL,” as set forth below, in 

documents (including email), magnetic media, or other tangible things 

provided by the Servicer to the Monitor in this case, including the 

subsequent disclosure by the Monitor to the Monitoring Committee of 

such information. In addition, it shall also govern the use and disclosure 

of such information when and if provided to the participating state parties 

or the participating agency or department of the United States whose 

claims are released through this settlement (“participating state or federal 

agency whose claims are released through this settlement”).

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2. The Monitor may, at his discretion, provide to the Monitoring Committee 

or to a participating state or federal agency whose claims are released 

through this settlement any documents or information received from the 

Servicer related to a Potential Violation or related to the review described 

in Section C.19; provided, however, that any such documents or 

information so provided shall be subject to the terms and conditions of 

these provisions. Nothing herein shall be construed to prevent the Monitor 

from providing documents received from the Servicer and not designated 

as “CONFIDENTIAL” to a participating state or federal agency whose 

claims are released through this settlement.

3. The Servicer shall designate as “CONFIDENTIAL” that information, 

document or portion of a document or other tangible thing provided by the 

Servicer to the Monitor, the Monitoring Committee or to any other 

participating state or federal agency whose claims are released through 

this settlement that Servicer believes contains a trade secret or confidential 

research, development, or commercial information subject to protection 

under applicable state or federal laws (collectively, “Confidential 

Information”). These provisions shall apply to the treatment of 

Confidential Information so designated. 

4. Except as provided by these provisions, all information designated as 

“CONFIDENTIAL” shall not be shown, disclosed or distributed to any 

person or entity other than those authorized by these provisions.

Participating states and federal agencies whose claims are released 

through this settlement agree to protect Confidential Information to the 

extent permitted by law.

5. This agreement shall not prevent or in any way limit the ability of a 

participating state or federal agency whose claims are released through 

this settlement to comply with any subpoena, Congressional demand for 

documents or information, court order, request under the Right of 

Financial Privacy Act, or a state or federal public records or state or 

federal freedom of information act request; provided, however, that in the 

event that a participating state or federal agency whose claims are released 

through this settlement receives such a subpoena, Congressional demand, 

court order or other request for the production of any Confidential 

Information covered by this Order, the state or federal agency shall, unless 

prohibited under applicable law or the unless the state or federal agency 

would violate or be in contempt of the subpoena, Congressional demand, 

or court order, (1) notify the Servicer of such request as soon as 

practicable and in no event more than ten (10) calendar days of its receipt 

or three calendar days before the return date of the request, whichever is 

sooner, and (2) allow the Servicer ten (10) calendar days from the receipt 

of the notice to obtain a protective order or stay of production for the 

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documents or information sought, or to otherwise resolve the issue, before 

the state or federal agency discloses such documents or information. In all 

cases covered by this Section, the state or federal agency shall inform the 

requesting party that the documents or information sought were produced 

subject to the terms of these provisions. 

G. Dispute Resolution Procedures. Servicer, the Monitor, and the Monitoring 

Committee will engage in good faith efforts to reach agreement on the proper 

resolution of any dispute concerning any issue arising under this Consent 

Judgment, including any dispute or disagreement related to the withholding of 

consent, the exercise of discretion, or the denial of any application. Subject to 

Section J, below, in the event that a dispute cannot be resolved, Servicer, the 

Monitor, or the Monitoring Committee may petition the Court for resolution of 

the dispute. Where a provision of this agreement requires agreement, consent of, 

or approval of any application or action by a Party or the Monitor, such agreement, 

consent or approval shall not be unreasonably withheld. 

H. Consumer Complaints. Nothing in this Consent Judgment shall be deemed to 

interfere with existing consumer complaint resolution processes, and the Parties 

are free to bring consumer complaints to the attention of Servicer for resolution 

outside the monitoring process. In addition, Servicer will continue to respond in 

good faith to individual consumer complaints provided to it by State Attorneys 

General or State Financial Regulators in accordance with the routine and practice 

existing prior to the entry of this Consent Judgment, whether or not such 

complaints relate to Covered Conduct released herein.

I. Relationship to Other Enforcement Actions. Nothing in this Consent Judgment 

shall affect requirements imposed on the Servicer pursuant to Consent Orders 

issued by the appropriate Federal Banking Agency (FBA), as defined in 12 U.S.C. 

§ 1813(q), against the Servicer. In conducting their activities under this Consent 

Judgment, the Monitor and Monitoring Committee shall not impede or otherwise 

interfere with the Servicer’s compliance with the requirements imposed pursuant 

to such Orders or with oversight and enforcement of such compliance by the FBA.

J. Enforcement

1. Consent Judgment. This Consent Judgment shall be filed in the U.S. 

District Court for the District of Columbia (the “Court”) and shall be 

enforceable therein. Servicer and the Releasing Parties shall waive their 

rights to seek judicial review or otherwise challenge or contest in any 

court the validity or effectiveness of this Consent Judgment. Servicer and 

the Releasing Parties agree not to contest any jurisdictional facts, 

including the Court’s authority to enter this Consent Judgment.

2. Enforcing Authorities. Servicer’s obligations under this Consent 

Judgment shall be enforceable solely in the U.S. District Court for the 

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District of Columbia. An enforcement action under this Consent 

Judgment may be brought by any Party to this Consent Judgment or the 

Monitoring Committee. Monitor Report(s) and Quarterly Report(s) shall 

not be admissible into evidence by a Party to this Consent Judgment 

except in an action in the Court to enforce this Consent Judgment. In 

addition, unless immediate action is necessary in order to prevent 

irreparable and immediate harm, prior to commencing any enforcement 

action, a Party must provide notice to the Monitoring Committee of its 

intent to bring an action to enforce this Consent Judgment. The members 

of the Monitoring Committee shall have no more than 21 days to 

determine whether to bring an enforcement action. If the members of the 

Monitoring Committee decline to bring an enforcement action, the Party 

must wait 21 additional days after such a determination by the members of 

the Monitoring Committee before commencing an enforcement action.

3. Enforcement Action. In the event of an action to enforce the obligations 

of Servicer and to seek remedies for an uncured Potential Violation for 

which Servicer’s time to cure has expired, the sole relief available in such 

an action will be:

(a) Equitable Relief. An order directing non-monetary equitable relief, 

including injunctive relief, directing specific performance under 

the terms of this Consent Judgment, or other non-monetary

corrective action.

(b) Civil Penalties. The Court may award as civil penalties an amount 

not more than $1 million per uncured Potential Violation; or, in the 

event of a second uncured Potential Violation of Metrics 1.a, 1.b, 

or 2.a (i.e., a Servicer fails the specific Metric in a Quarter, then 

fails to cure that Potential Violation, and then in subsequent 

Quarters, fails the same Metric again in a Quarter and fails to cure 

that Potential Violation again in a subsequent Quarter), where the 

final uncured Potential Violation involves widespread 

noncompliance with that Metric, the Court may award as civil 

penalties an amount not more than $5 million for the second 

uncured Potential Violation.

Nothing in this Section shall limit the availability of remedial 

compensation to harmed borrowers as provided in Section E.5.

(c) Any penalty or payment owed by Servicer pursuant to the Consent 

Judgment shall be paid to the clerk of the Court or as otherwise 

agreed by the Monitor and the Servicer and distributed by the 

Monitor as follows:

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1. In the event of a penalty based on a violation of a term of 

the Servicing Standards that is not specifically related to 

conduct in bankruptcy, the penalty shall be allocated, first, 

to cover the costs incurred by any state or states in 

prosecuting the violation, and second, among the 

participating states according to the same allocation as the 

State Payment Settlement Amount.

2. In the event of a penalty based on a violation of a term of 

the Servicing Standards that is specifically related to 

conduct in bankruptcy, the penalty shall be allocated to the 

United States or as otherwise directed by the Director of the 

United States Trustee Program.

3. In the event of a payment due under Paragraph 10.d of the 

Consumer Relief requirements, 50% of the payment shall 

be allocated to the United States, and 50% shall be 

allocated to the State Parties to the Consent Judgment, 

divided among them in a manner consistent with the 

allocation in Exhibit B of the Consent Judgment. 

K. Sunset. This Consent Judgment and all Exhibits shall retain full force and effect 

for three and one-half years from the date it is entered (the “Term”), unless 

otherwise specified in the Exhibit. Servicer shall submit a final Quarterly Report 

for the last quarter or portion thereof falling within the Term, and shall cooperate 

with the Monitor’s review of said report, which shall be concluded no later than 

six months following the end of the Term, after which time Servicer shall have no 

further obligations under this Consent Judgment.

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GARCIA 04385
EXHIBIT E-1

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Servicing Standards Quarterly Compliance MetricsExecutive Summary Sampling: (a) A random selection of the greater of 100 loans and a statistically significant sample. (b) Sample will be selected from the population as defined in column E 

Review and Reporting Period: Results will be reported Quarterly and 45 days after the end of the quarter. Errors Definition: An error is a measurement in response to a test question related to the Servicing Standards that results in the failure of the specified outcome. Errors in response to multiple questions with respect to a single outcome would be treated as only a single error. 

Metrics Tested 

A B C

D E F

Metric Measurements 

Loan Level Tolerance for Error1

Threshold Error Rate2 Test Loan Population and Error Definition Test Questions 

1. Outcome Creates Significant Negative Customer Impact 

A. Foreclosure sale in error Customer is in default, legal standing to 

foreclose, and the loan is not subject to active trial, or BK. 

n/a 1% Population Definition: Foreclosure Sales that 

occurred in the review period. A. Sample :# of Foreclosure Sales in the 

review period that were tested. 

B. Error Definition: # of loans that went to 

foreclosure sale in error due to failure of any one of the test questions for this metric. 

Error Rate = B/A 

1. Did the foreclosing party have legal standing to 

foreclose? 

2. Was the borrower in an active trial period plan 

(unless the servicer took appropriate steps to postpone sale)? 

3. Was the borrower offered a loan modification 

fewer than 14 days before the foreclosure sale date (unless the borrower declined the offer or the servicer took appropriate steps to postpone the sale)? 

4. Was the borrower not in default (unless the 

default is cured to the satisfaction of the Servicer or investor within 10 days before the foreclosure sale date and the Servicer took appropriate steps to postpone sale)? 

5. Was the borrower protected from foreclosure 

by Bankruptcy (unless Servicer had notice of such protection fewer than 10 days before the foreclosure sale date and Servicer took appropriate steps to postpone sale)? 

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A B C

D E F

Metric Measurements 

Loan Level Tolerance for Error1

Threshold Error Rate2 Test Loan Population and Error Definition Test Questions 

B. Incorrect Mod denial Program eligibility, all documentation 

received, DTI test, NPV test.

5% On income 

errors 

5% Population Definition: Modification Denied In 

the Review Period. Error Definition: # of loans that were denied a modification as a result of failure of anyone of the test questions for this metric. 

1. Was the evaluation of eligibility Inaccurate ( as 

per HAMP, Fannie, Freddie or proprietary modification criteria)? 

2. Was the income calculation Inaccurate? 3. Were the inputs used in the decision tool (NPV 

and Waterfall test) entered in error or inconsistent with company policy? 

4. Was the loan NPV positive? 5. Was there an inaccurate determination that 

the documents received were incomplete? 

6. Was the trial inappropriately failed? 

2. Integrity of Critical Sworn Documents 

A. Was AOI properly 

prepared 

Based upon personal knowledge, properly notarized, amounts agree to system of record within tolerance if overstated. 

Question 1, 

Y/N; 

Question 2, 

Amounts 

overstated (or, 

for question on 

Escrow 

Amounts, 

understated) 

by the greater 

of $99 or 1% of 

the Total 

Indebtedness 

Amount 

5% Population Definition: Affidavits of 

indebtedness filed in the review period. Error Definition: For question 1, yes; for question 2, the # of Loans where the sum of errors exceeds the allowable threshold. 

1. Taken as a whole and accounting for contrary 

evidence provided by the Servicer, does the sample indicate systemic issues with either affiants lacking personal knowledge or improper notarization? 

2. Verify all the amounts outlined below against 

the system of record a. Was the correct principal balance used 

Was the correct interest amount (and per diem) used? 

b. Was the escrow balance correct? c. Were correct other fees used? d. Was the correct corporate advance 

balance used? 

e. Was the correct late charge balance used? f. Was the suspense balance correct? g. Was the total indebtedness amount on 

the Affidavit correct? 

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A B C

D E F

Metric Measurements 

Loan Level Tolerance for Error1

Threshold Error Rate2 Test Loan Population and Error Definition Test Questions 

B. POC Accurate statement of pre-petition 

arrearage to system of record. 

Amounts over 

stated by the 

greater of $50 

or 3% of the 

correct PrePetition 

Arrearage 

5% Population Definition: POCs filed in the 

review period. Error Definition: # of Loans where sum of errors exceeds the allowable threshold. 

1) Are the correct amounts set forth in the form, 

with respect to pre-petition missed payments, fees, expenses charges, and escrow shortages or deficiencies? 

C. MRS Affidavits Customer is in default and amount of 

arrearage is within tolerance. 

Amounts 

overstated (or 

for escrows 

amounts, 

understated) 

by the greater 

of $50 or 3% of 

the correct 

Post Petition 

Total Balance 

5% Population Definition: Affidavits supporting 

MRS’s filed in the review period Error Definition: # of Loans where the sum of errors exceeds the allowable threshold. 

1. Verify against the system of record, within 

tolerance if overstated: 

a. the post-petition default amount; b. the amount of fees or charges applied to 

such pre-petition default amount or postpetition amount since the later of the date of the petition or the preceding statement; and 

c. escrow shortages or deficiencies. 

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A B C

D E F

Metric Measurements 

Loan Level Tolerance for Error1

Threshold Error Rate2 Test Loan Population and Error Definition Test Questions 

3. Pre-foreclosure Initiation 

A. Pre Foreclosure Initiation Accuracy of Account information. Amounts over 

stated by the 

greater of $99 

or 1% of the 

Total balance 

5% Population Definition: Loans with a 

Foreclosure referral date in the review period. Error Definition: # of Loans that were referred to foreclosure with an error in any one of the foreclosure initiation test questions. 

** Verify all the amounts outlined below against the system of record. 1. Was the loan delinquent as of the date the first 

legal action was filed? 

2. Was information contained in the Account 

Statement completed accurately? a) The total amount needed to reinstate or 

bring the account current, and the amount of the principal; 

b) The date through which the borrower’s 

obligation is paid; 

c) The date of the last full payment; d) The current interest rate in effect for the 

loan; 

e) The date on which the interest rate may 

next reset or adjust; 

f) The amount of any prepayment fee to be 

charged, if any; 

g) A description of any late payment fees; 

and 

h) a telephone number or electronic mail 

address that may be used by the obligor to obtain information regarding the mortgage. 

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A B C

D E F

Metric Measurements 

Loan Level Tolerance for Error1

Threshold Error Rate2 Test Loan Population and Error Definition Test Questions 

B. Pre Foreclosure Initiation 

Notifications 

Notification sent to the customer supporting right to foreclose along with: Applicable information upon customers request, Account statement information, Ownership statement, and Loss Mitigation statement. Notifications required before 14 days prior to referral to foreclosure. 

N/A 5% Population Definition: Loans with a 

Foreclosure referral date in the review period. Error Definition: # of Loans that were referred to foreclosure with an error in any one of the foreclosure initiation test questions. 

1. Were all the required notifications statements 

mailed no later than 14 days prior to first Legal Date (i) Account Statement; (ii) Ownership Statement; and (iii) Loss Mitigation Statement?

2. Did the Ownership Statement accurately 

reflect that the servicer or investor has the right to foreclose? 

3. Was the Loss Mitigation Statement complete 

and did it accurately state that 

a) The borrower was ineligible (if applicable); 

or 

b) The borrower was solicited, was the 

subject of right party contact routines, and that any timely application submitted by the borrower was evaluated? 

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A B C

D E F

Metric Measurements 

Loan Level Tolerance for Error1

Threshold Error Rate2 Test Loan Population and Error Definition Test Questions 

4. Accuracy and Timeliness of Payment Application and Appropriateness of Fees

A. Fees adhere to guidance 

(Preservation fees, Valuation fees and Attorney's fees) 

Services rendered, consistent with loan instrument, within applicable requirements. 

Amounts over 

stated by the 

greater of $50 

or 3% of the 

Total Default 

Related Fees 

Collected 

5% Population Definition: Defaulted loans (60 +) 

with borrower payable default related fees* collected. Error Definition: # of loans where the sum of default related fee errors exceeds the threshold. * Default related fees are defined as any fee collected for a default-related service after the agreement date. 

For fees collected in the test period:

1. Was the frequency of the fees collected 

(in excess of what is consistent with state guidelines or fee provisions in servicing standards? 

2. Was amount of the fee collected higher 

than the amount allowable under the Servicer’s Fee schedule and for which there was not a valid exception?

B. Adherence to customer 

payment processing 

Payments posted timely (within 2 business days of receipt) and accurately. 

Amounts 

understated by 

the greater 

$50.00 or 3% 

of the 

scheduled 

payment 

5% Population Definition: All subject payments 

posted within review period. Error Definition: # of loans with an error in any one of the payment application test questions. 

1. Were payments posted to the right 

account number? 

2. Were payments posted in the right 

amount? 

3. Were properly identified conforming 

payments posted within 2 business days of receipt and credited as of the date of receipt? 

4. Did servicer accept payments within 

$50.00 of the scheduled payment, including principal and interest and where applicable taxes and insurance as required by the servicing standards? 

5. Were partial payments credited to the 

borrower’s account as of the date that the funds cover a full payment? 

6. Were payments posted to principal 

interest and escrow before fees and expenses? 

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A B C

D E F

Metric Measurements 

Loan Level Tolerance for Error1

Threshold Error Rate2 Test Loan Population and Error Definition Test Questions 

C. Reconciliation of certain 

waived fees. (I.b.11.C) 

Appropriately updating the Servicer’s systems of record in connection with the reconciliation of payments as of the date of dismissal of a debtor’s Chapter 13 bankruptcy case, entry of an order granting Servicer relief from the stay under Chapter 13, or entry of an order granting the debtor a discharge under Chapter 13, to reflect the waiver of any fee, expense or charge pursuant to paragraphs III.B.1.c.i or III.B.1.d of the Servicing Standards (within applicable tolerances). 

Amounts over 

stated by the 

greater of $50 

or 3 % of the 

correct 

reconciliation 

amount 

5% Population Definition: All accounts where inline reconciliation routine is completed within 

review period. Error Definition: # of loans with an error in the reconciliation routine resulting in overstated amounts remaining on the borrower account. 

1. Were all required waivers of Fees, 

expense or charges applied and/or corrected accurately as part of the reconciliation? 

D. Late fees adhere to 

guidance 

Late fees are collected only as permitted under the Servicing Standards (within applicable tolerances).

Y/N 5% Population Definition: All late fees collected

within the review period. Error Definition: # of loans with an error on any one of the test questions.

1. Was a late fee collected with respect 

to a delinquency attributable solely to late fees or delinquency charges assessed on an earlier payment? 

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A B C

D E F

Metric Measurements 

Loan Level Tolerance for Error1

Threshold Error Rate2 Test Loan Population and Error Definition Test Questions 

5. Policy/Process Implementation 

A. Third Party Vendor 

Management 

Is periodic third party review process in place? Is there evidence of remediation of identified issues? 

Y/N N Quarterly review of a vendors providing 

Foreclosure Bankruptcy, Loss mitigation and other Mortgage services. Error Definition: Failure on any one of the test questions for this metric. 

1. Is there evidence of documented 

oversight policies and procedures demonstrating compliance with vendor oversight provisions: (i) adequate due diligence procedures, (ii) adequate enforcement procedures (iii) adequate vendor performance evaluation procedures (iv) adequate remediation procedures?3

2. Is there evidence of periodic sampling and 

testing of foreclosure documents (including notices of default and letters of reinstatement) and bankruptcy documents prepared by vendors on behalf of the servicer? 

3. Is there evidence of periodic sampling of 

fees and costs assessed by vendors to; (i) substantiate services were rendered (ii) fees are in compliance with servicer fee schedule (iii) Fees are compliant with state law and provisions of the servicing standards? 

4. Is there evidence of vendor scorecards 

used to evaluate vendor performance that include quality metrics (error rate etc)? 

5. Evidence of remediation for vendors who 

fail metrics set forth in vendor scorecards and/or QC sample tests consistent with the servicer policy and procedures? 

B. Customer Portal Implementation of a customer portal. Y/N N A Quarterly testing review of Customer 

Portal. 

1. Does the portal provide loss mitigation 

status updates? 

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E1-9

A B C

D E F

Metric Measurements 

Loan Level Tolerance for Error1

Threshold Error Rate2 Test Loan Population and Error Definition Test Questions 

C. SPOC Implement single point of contact (“SPOC”). Y/N

5% for 

Question 4 

N

For 

Question 

#4: 5% 

Quarterly review of SPOC program per provisions in the servicing standard. Population Definition (for Question 4):Potentially eligible borrowers who were identified as requesting loss mitigation assistance. Error Definition: Failure on any one of the test questions for this metric. 

1. Is there evidence of documented policies 

and procedures demonstrating compliance with SPOC program provisions? 

2. Is there evidence that a single point of 

contact is available for applicable borrowers? 

3. Is there evidence that relevant records 

relating to borrower’s account are available to the borrower’s SPOC? 

4. Is there evidence that the SPOC has been 

identified to the borrower and the method the borrower may use to contact the SPOC has been communicated to the borrower? 

D. Workforce Management Training and staffing adequacy 

requirements. 

Y/N N Loss mitigation, SPOC and Foreclosure Staff.

Error Definition: Failure on any one of the test questions for this metric. 

1. Is there evidence of documented 

oversight policies and procedures demonstrating effective forecasting, capacity planning, training and monitoring of staffing requirements for foreclosure operations? 

2. Is there evidence of periodic training and 

certification of employees who prepare Affidavits sworn statements or declarations. 

E. Affidavit of Indebtedness 

Integrity. 

Affidavits of Indebtedness are signed by affiants who have personal knowledge of relevant facts and properly review the affidavit before signing it. 

Y/N N Annual Review of Policy. 1. Is there evidence of documented policies 

and procedures sufficient to provide reasonable assurance that affiants have personal knowledge of the matters covered by affidavits of indebtedness and have reviewed affidavit before signing it? 

F. Account Status Activity. System of record electronically documents 

key activity of a foreclosure, loan modification, or bankruptcy. 

Y/N N Annual Review of Policy. 1. Is there evidence of documented policies 

and procedures designed to ensure that the system of record contains documentation of key activities? 

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A B C

D E F

Metric Measurements 

Loan Level Tolerance for Error1

Threshold Error Rate2 Test Loan Population and Error Definition Test Questions 

6. Customer Experiences 

A. Complaint response 

timeliness 

Meet the requirements of Regulator complaint handling. 

N/A 5% Population Definition: Government 

submitted complaints and inquiries from individual borrowers who are in default and/or have applied for loan modifications received during the three months prior to 40 days prior to the review period. (To allow for response period to expire). Error Definition: # of loans that exceeded the required response timeline. 

1. Was written acknowledgment regarding 

complaint/inquires sent within 10 business days of complaint/inquiry receipt?** 

2. Was a written response (“Forward 

Progress”) sent within 30 calendar days of complaint/inquiry receipt? receipt= from the Attorney General, state financial regulators, the Executive Office for United States Trustees/regional offices of the United States Trustees, and the federal regulators and documented within the System of Record. 

B. Loss Mitigation 

i. Loan Modification 

Document Collection timeline compliance 

 N/A 5% Population Definition: Loan modifications 

and loan modification requests (packages) that that were missing documentation at receipt and received more than 40 days prior to the end of the review period. Error Definition: The total # of loans processed outside the allowable timelines as defined under each timeline requirement tested. 

1. Did the Servicer notify borrower of any known 

deficiency in borrower’s initial submission of information, no later than 5 business days after receipt, including any missing information or documentation? 

2. Was the Borrower afforded 30 days from the 

date of Servicer’s notification of any missing information or documentation to supplement borrower’s submission of information prior to making a determination on whether or not to grant an initial loan modification? 

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E1-11 

A B C

D E F

Metric Measurements 

Loan Level Tolerance for Error1

Threshold Error Rate2 Test Loan Population and Error Definition Test Questions 

ii. Loan Modification 

Decision/Notification timeline compliance 

 10% Population Definition: Loan modification 

requests (packages) that are denied or approved in the review period. Error Definition: The total # of loans processed outside the allowable timelines as defined under each timeline requirement tested. 

1. Did the servicer respond to request for a 

modification within 30 days of receipt of all necessary documentation? 

2. Denial Communication: Did the servicer notify 

customers within 10 days of denial decision? 

iii. Loan Modification 

Appeal timeline compliance 

 10% Population Definition: Loan modification 

requests (packages) that are borrower appeals in the review period. Error Definition: The total # of loans processed outside the allowable timeline tested. 

1. Did Servicer respond to a borrowers request 

for an appeal within 30 days of receipt? 

iv. Short Sale Decision 

timeline compliance 

 10% Population Definition: Short sale requests 

(packages) that are complete in the three months prior to 30 days prior to the end of the review period. (to allow for short sale review to occur). Error Definition: The total # of loans processed outside the allowable timeline tested. 

1. Was short sale reviewed and a decision 

communicated within 30 days of borrower submitting completed package? 

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E1-12 

A B C

D E F

Metric Measurements 

Loan Level Tolerance for Error1

Threshold Error Rate2 Test Loan Population and Error Definition Test Questions 

v. Short Sale Document 

Collection timeline compliance 

 5% Population Definition: Short sale requests 

(packages) missing documentation that are received in the three months prior to 30 days prior to the end of the review period (to allow for short sale review to occur). Error Definition: The total # of loans processed outside the allowable timeline tested. 

1. Did the Servicer provide notice of missing 

documents within 30 days of the request for the short sale? 

vi. Charge of application fees for Loss mitigation 

1% Population Definition: loss mitigation 

requests (packages) that are Incomplete, denied , approved and borrower appeals in the review period. (Same as 6.B.i) Error Definition: The # of loss mitigation applications where servicer collected a processing fee. 

1. Did the servicer assess a fee for processing a 

loss mitigation request? 

vii. Short Sales 

a. Inclusion of 

notice of whether or not a deficiency will be required 

Provide information related to any required deficiency claim. 

n/a 5% Population Definition: Short sales approved 

in the review period. Error Definition: The # of short sales that failed any one of the deficiency test questions 

1. If the short sale was accepted, did borrower 

receive notification that deficiency or cash contribution will be needed? 

2. Did borrower receive in this notification 

approximate amounts related to deficiency or cash contribution? 

viii. Dual Track 

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E1-13 

A B C

D E F

Metric Measurements 

Loan Level Tolerance for Error1

Threshold Error Rate2 Test Loan Population and Error Definition Test Questions 

a. Referred to 

foreclosure in violation of Dual Track Provisions 

Loan was referred to foreclosure in error. n/a 5% Population Definition: Loans with a first legal 

action date in the review period. Error Definition: The # of loans with a first legal filed in the review period that failed any one of the dual tracking test questions. 

1. Was the first legal action taken while the 

servicer was in possession of an active, complete loan modification package (as defined by the Servicing Standards) that was not decisioned as required by the standards? 

2. Was the first legal commenced while the 

borrower was approved for a loan modification but prior to the expiration of the borrower acceptance period, borrower decline of offer or while in an active trial period plan? 

b. Failure to 

postpone foreclosure proceedings in violation of Dual Track Provisions 

Foreclosure proceedings allowed to proceed in error. 

n/a 5% Population Definition: Active foreclosures 

during review period. Error Definition: # of active foreclosures that went to judgment as a result of failure of any one on of the active foreclosure dual track test question. 

1. Did the servicer proceed to judgment or order 

of sale upon receipt of a complete loan modification package within 30 days of the Post-Referral to Foreclosure Solicitation Letter?**  

**Compliance of Dual tracking provisions for foreclosure sales are referenced in 1.A 

C. Forced Placed Insurance 

i. Timeliness of notices Notices sent timely with necessary 

information. 

n/a 5% Population Definition: Loans with forced 

placed coverage initiated in review period. Error Definition: # of loans with active force place insurance resulting from an error in any one of the force-place insurance test questions. 

1. Did Servicer send all required notification 

letters (ref. V 3a i-vii) notifying the customer of lapse in insurance coverage? 

2. Did the notification offer the customer the 

option to have the account escrowed to facilitate payment of all insurance premiums and any arrearage by the servicer prior to obtaining force place insurance? 

3. Did the servicer assess forced place insurance 

when there was evidence of a valid policy? 

ii Termination of Force 

place Insurance 

Timely termination of force placed insurance. 

5% Population Definition: Loans with forced 

placed coverage terminated in review period. Error Definition: # of loans terminated force place insurance with an error in any one of the force- place insurance test questions.

Did Servicer terminate FPI within 15 days of receipt of evidence of a borrower’s existing insurance coverage and refund the pro-rated portion to the borrower’s escrow account? 

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E1-14 

A B C

D E F

Metric Measurements 

Loan Level Tolerance for Error1

Threshold Error Rate2 Test Loan Population and Error Definition Test Questions 1 Loan Level Tolerance for Error: This represents a threshold beyond which the variance between the actual outcome and the expected outcome on a single test case is deemed 

reportable

2 Threshold Error Rate: For each metric or outcome tested if the total number of reportable errors as a percentage of the total number of cases tested exceeds this limit then the 

Servicer will be determined to have failed that metric for the reported period. 

3 For purposes of determining whether a proposed Metric and associated Threshold Error Rate is similar to those contained in this Schedule, this Metric 5.A shall be excluded from 

consideration and shall not be treated as representative. 

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EXHIBIT F

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FEDERAL RELEASE

This Federal Release (“Release”) is entered into among the United States of America, its 

agencies, and departments (collectively, “the United States”), acting through the United States 

Department of Justice, and Wells Fargo & Company (the “COMPANY”) (hereafter the United 

States and the COMPANY are collectively referred to as “the Parties”), through their authorized 

representatives.

RECITALS

A. The COMPANY is a Delaware corporation headquartered in San Francisco, 

California.

B. The COMPANY is a financial holding and a bank holding company. The 

COMPANY, either through its own operations or through the operations of its affiliates and 

subsidiaries, serves, and during the relevant period served: (1) as a participant in the Direct 

Endorsement Lender program of the Federal Housing Administration (FHA) within the United 

States Department of Housing and Urban Development (HUD); (2) as a mortgagee or servicer 

for mortgages insured or guaranteed by federal mortgage programs administered by agencies that 

include FHA, the United States Department of Veterans Affairs (VA), and the United States 

Department of Agriculture Rural Development; (3) as a participating servicer in the Making 

Home Affordable Program (MHA) (including MHA's component program, the Home Affordable 

Modification Program (HAMP)) of the United States Department of the Treasury (Treasury) and 

HUD, and as a participant in various state programs of the Housing Finance Agency Innovation 

Fund for the Hardest Hit Housing Markets (HHF); and (4) as an entity that litigates single-family 

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F-2

residential mortgage issues in U.S. Bankruptcy Courts in capacities that include commencing and 

pursuing or supporting litigation commenced against mortgagors and other debtors.

C. The United States contends that it has certain civil claims based on conduct of the 

COMPANY and its affiliated entities in servicing of mortgage loans (the “Covered Servicing 

Conduct”). Such Covered Servicing Conduct encompasses all activities of the COMPANY, of 

any affiliated entity during or prior to such time as it was an affiliated entity, and all of the 

current or former officers, directors, employees and agents of any of the foregoing, directed 

toward servicing (including subservicing and master servicing), whether for their own account or 

for the account of others, of mortgage loans for single-family residential homeowners (which 

includes loans secured by one- to four-family residential properties, whether used for investor or 

consumer purposes), whether in the form of a mortgage, deed of trust or other security 

instrument creating a lien upon such property or any other property described therein that secures 

the related mortgage loan (“single-family residential mortgage loans”) from and after the closing 

of a borrower’s mortgage loan and includes, but is not limited to, the following conduct: 

(1) Deficiencies in performing loan modification and other loss mitigation 

activities, including extensions, forbearances, short sales and deeds in lieu of foreclosure, setting 

the qualifying criteria for any of the foregoing and/or setting the terms and conditions for any of 

the foregoing; 

(2) Deficiencies in foreclosing on single-family residential mortgage loans or 

acquiring title in lieu of foreclosure, including the designation and identity of the foreclosing 

party, the timing of foreclosures, transfer of legal or beneficial ownership to the mortgage loan 

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F-3

and/or the related servicing rights or obligations, the charging of any fees, the preparation, 

contents, execution, notarization or presentation of any documents filed with or submitted to a 

court or any government agency, or otherwise used as part of the foreclosure process (including, 

but not limited to, affidavits, declarations, certifications, substitutions of trustees, and 

assignments) and dual-tracking foreclosure and loan modification activities, and communications 

with borrowers in respect of foreclosure;

(3) Other deficiencies in servicing single-family residential mortgage loans 

relating to:

(a) Collections activity, including all contact with borrowers (e.g., 

telephone calls, letters, and in-person visits) in respect of such activities;

(b) Practices relating to paying or failing to pay taxes (including 

property taxes), hazard insurance, forced-place insurance, and homeowner association dues or 

other items provided for in a mortgage loan escrow arrangement (including making or failing to 

make such payments), including obtaining or maintaining insurance and advancing funds to pay 

therefor and the creation and maintenance of such escrow accounts;

(c) Use or supervision of vendors, agents and contract employees, and 

their activities in connection with creation and recording of assignments, servicing, foreclosure, 

and loss mitigation activities, including subservicers, foreclosure and bankruptcy attorneys, and 

other default service providers, and pursuit of claims against vendors and other third parties for 

failure of such third parties to comply with contractual or other obligations;

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F-4

(d) Activities related to the executing, notarizing, transferring or 

recording of mortgages; the obtaining, executing, notarizing, transferring or recording of 

assignments; or activities related to the use of any mortgage registry system, including MERS, 

and including the transferring of mortgages or assignments using MERS;

(e) Account statements, disclosures, and/or other communications to 

borrowers; unintentional reporting errors regarding activities that, but for this Paragraph, would 

be Covered Servicing Conduct, and unintentional remittance errors that are cured;

(f) Maintenance and placement of loan-level and pool-level mortgage 

insurance and guarantees, hazard insurance, flood insurance, title insurance, and other insurance 

related to mortgage loans and related properties, including claims activity;

(g) Handling and resolution of inquiries, disputes and complaints by or 

on behalf of borrowers and frequency and adequacy of communications with borrowers;

(h) Securing, inspecting, repairing, maintaining, or preserving 

properties both before and after foreclosure or other acquisition of title;

(i) Adequacy of staffing, training, systems and processes, including 

maintenance and security of access to records relating to servicing, foreclosure, bankruptcy, 

property sale and management and activities related or ancillary thereto;

(j) Determinations in respect of the appropriate actions of obtaining 

value for mortgage loans, including whether to pursue foreclosure on properties, whether to assert 

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F-5

or abandon liens and other claims and actions taken in respect thereof, and whether to pursue a 

loan modification or any particular loan modification or other form of loss mitigation;

(k) Acceptance, rejection, application, or reporting of payments made 

on behalf of borrowers, including the assessment of any fees and placement of the payment(s) in a 

suspense account;

(l) Obtaining, securing, updating, transferring, or providing 

promissory notes or endorsements of promissory notes through allonges or otherwise;

(m) Licensing or registration of employees, agents, or contractors, or 

designation of employees as agents for another entity, through corporate resolutions or Powers of 

Attorney or otherwise;

(n) Pursuing claims post foreclosure, including seeking deficiency 

judgments;

(o) Eviction notices, registrations of vacant properties, and any activity 

relating to the sale or disposition of foreclosed or acquired properties (including Real Estate 

Owned properties), including management of such properties and proceedings related to such 

properties;

(p) Executing, notarizing, or recording any documents related to the 

sale of acquired properties, including the warranty deeds and closing documents;

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F-6

(q) Custodial and trustee functions related to the Covered Servicing 

Conduct;

(r) Quality control, quality assurance or compliance or audit testing or 

oversight related to the Covered Servicing Conduct; for avoidance of doubt, quality control or 

compliance reviews associated with the origination, sale, or securitization of mortgage loans does 

not constitute Covered Servicing Conduct;

(s) Reporting, certification or registration requirements related to any 

of the Covered Servicing Conduct; and

(t) Communications with borrowers with respect to the Covered 

Servicing Conduct.

(4) Deficiencies in the COMPANY’s or any of its affiliates’ participation in 

and implementation of the Hardest Hit Fund Program and Making Home Affordable Program, 

including all of its component programs (e.g., HAMP, 2MP, HAFA, UP, PRA-HAMP, FHAHAMP, FHA2LP, and RD-HAMP).

D. The United States further contends that it has certain civil claims based on the 

conduct of the COMPANY and its affiliated entities in originating mortgage loans (the “Covered 

Origination Conduct”). Such Covered Origination Conduct consists of all activities of the 

COMPANY, of any affiliated entity during or prior to such time as it was an affiliated entity, and 

all of the current or former officers, directors, employees, and agents of any of the foregoing,

directed toward directly or indirectly originating, assisting in the origination of, or purchasing 

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GARCIA 04407
F-7

single-family residential mortgage loans and excludes conduct occurring following the closing of 

the borrower’s mortgage loan that is otherwise covered as the Covered Servicing Conduct. Such 

Covered Origination Conduct includes, but is not limited to, the following conduct:

(1) Submitting loans for insurance endorsement and claims for insurance 

benefits for FHA loans that the COMPANY or any affiliated entity during or prior to such time 

as it was an affiliated entity endorsed or underwrote as a participant in the FHA’s Direct 

Endorsement Program that failed to meet any applicable underwriting requirements, including 

those set forth in the applicable version of the HUD Handbook 4155.1, as supplemented by 

relevant mortgagee letters, all as of the time of origination;

(2) Submitting loans for insurance endorsement or claims for insurance 

benefits for FHA loans that the COMPANY or any affiliated entity during or prior to such time 

as it was an affiliated entity endorsed or underwrote as a participant in the FHA’s Direct 

Endorsement Program while failing to implement applicable quality control measures; and

(3) Other deficiencies in originating single-family residential mortgage loans 

relating to:

(a) Processing, underwriting, closing, or funding of loans and the 

terms and conditions of such loans;

(b) Approving or denying loan applications;

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F-8

(c) Pricing of loans, including the charging and splitting of any fee or 

discount points;

(d) Recommendations of particular types of loan products, loan 

features or terms and conditions of any loan;

(e) Valuing the properties used as collateral for such loans, including 

use of employee, independent and vendor management appraisers and alternative valuation 

methods such as AVMs and BPOs;

(f) Use of vendors, including vendor management companies and 

other providers of real estate settlement services, whether affiliated or unaffiliated;

(g) Payment of fees or other things of value in connection with the 

making or receiving of referrals of settlement and other services;

(h) Conduct of any vendors used in connection with the origination of 

loans, including, but not limited to, closing agents, appraisers, real estate agents, title review, 

flood inspection, and mortgage brokers;

(i) Drafting of loan documents and loan disclosures and the provision 

of such disclosures;

(j) Obtaining and recording of collateral documents relating to loans, 

including, but not limited to, use of trustees or designees on mortgages or deeds of trust;

(k) Advertising of loans and solicitation of borrowers;

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F-9

(l) Licensing, registration, qualifications or approvals of employees in 

connection with the Covered Origination Conduct; and

(m) Quality control, quality assurance or compliance or audit testing or 

oversight related to the Covered Origination Conduct.

E. The United States further contends that it has certain civil claims based on the 

COMPANY’s servicing, including servicing by any affiliated entity during or prior to such time 

as it was an affiliated entity, and by any of the COMPANY’s or such affiliated entities’ current 

or former officers, directors, employees, and agents, of loans of borrowers in bankruptcy (the 

“Covered Bankruptcy Conduct”). Such Covered Bankruptcy Conduct includes, but is not limited 

to, the following conduct:

(1) Deficiencies in servicing residential mortgage loans for borrowers in 

bankruptcy relating to:

(a) The preparation, prosecution, documentation, substantiation, or 

filing of proofs of claim, motions seeking relief from the automatic stay, objections to plan 

confirmation, motions to dismiss bankruptcy cases, and affidavits, declarations, and other 

mortgage-related documents in bankruptcy courts;

(b) Charging and timing of fees and expenses, including any fees or 

expenses assessed to the borrower due to delay while the bankruptcy court reviews a pending 

request for loan modification or delay by the Chapter 13 trustee to timely remit the borrower’s 

payments;

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F-10

(c) Use or disclosure of escrow accounts, including any advances on 

borrower’s behalf;

(d) Account statements, disclosures, and/or other communications to 

borrowers, including: (i) assessing, imposing, posting, or collecting fees and charges; (ii) 

disclosure of fees and charges assessed, imposed or posted during the bankruptcy case; and (iii) 

collection of undisclosed post-petition fees and charges after the borrower receives a discharge, 

the COMPANY obtains relief from the automatic stay, or the bankruptcy case is dismissed;

(e) Adequacy of staffing, training, systems, and processes relating to 

administering and servicing loans for borrowers in bankruptcy;

(f) Use or supervision of vendors and contract employees, including 

Lender Processing Services, Inc., bankruptcy attorneys and other default service providers;

(g) Pursuit of or failure to pursue claims against vendors and other 

third parties for failure of such third parties to comply with contractual or other obligations; and

(h) Handling and resolution of inquiries, disputes or complaints by or 

on behalf of borrowers, and frequency and adequacy of communications with borrowers in 

bankruptcy.

(2) Deficiencies in accounting for, processing, approving and administering 

loan modifications for borrowers in bankruptcy relating to:

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F-11

(a) Charging late fees or seeking arrearages while a trial period 

modification plan or permanent loan modification plan is in place and borrower is timely making 

payments under the terms of the loan modification plan;

(b) Seeking relief from the automatic stay when the COMPANY has 

approved a trial period or permanent loan modification plan and borrower is timely making 

payments under the terms of the loan modification plan; and

(c) Delays in approving or finalizing the documentation necessary to 

the approval of loan modifications for borrowers in bankruptcy.

F. This Release is neither an admission of liability of the allegations of the 

Complaint or in cases settled pursuant to this Consent Judgment, nor a concession by the United 

States that its claims are not well-founded.

To avoid the delay, uncertainty, inconvenience, and expense of protracted litigation of the 

above claims, and in consideration of the mutual promises and obligations of the Consent 

Judgment, the Parties agree and covenant as follows:

TERMS AND CONDITIONS

(1) The COMPANY and/or its affiliated entities shall pay or cause to be paid,

for the purposes specified in the Consent Judgment, the amount specified in Paragraph 3 of the 

Consent Judgment (“Direct Payment Settlement Amount”) by electronic funds transfer no later 

than seven days after the United States District Court for the District of Columbia enters the final 

non-appealable Consent Judgment (the “Effective Date of the Consent Judgment”) pursuant to 

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F-12

written instructions to be provided by the United States Department of Justice. The COMPANY

and/or its affiliated entities shall also undertake, for the purposes specified in the Consent 

Judgment, certain consumer relief activities as set forth in Exhibit D to such Consent Judgment 

and will be obligated to make certain payments (the “Consumer Relief Payments”) in the event 

that it does not or they do not complete the Consumer Relief Requirements set forth in Exhibit D 

to the Consent Judgment. The releases contained in this Release shall become effective upon 

payment of the Direct Payment Settlement Amount. The United States may declare this Release 

null and void with respect to the United States if the COMPANY or its affiliated entities do not 

make the Consumer Relief Payments required under this Consent Judgment and fails to cure 

such non-payment within thirty days of written notice by the United States. 

(2)

(a) Subject to the exceptions in Paragraph 11 (concerning excluded 

claims) below, the United States fully and finally releases the COMPANY and any current or 

former affiliated entity (to the extent the COMPANY retains liabilities associated with such 

former affiliated entity), and any of their respective successors or assigns, as well as any current 

or former director, current or former officer, and current or former employee of any of the 

foregoing, individually and collectively, from any civil or administrative claims the United States 

has or may have, and from any civil or administrative remedies or penalties (expressly including 

punitive or exemplary damages) it may seek or impose, based on the Covered Servicing Conduct 

that has taken place as of 11:59 p.m., Eastern Standard Time, on February 8, 2012 (and, for the 

avoidance of doubt, with respect to FHA-insured loans, whether or not a claim for mortgage 

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F-13

insurance benefits has been or is in the future submitted), under the Financial Institutions Reform, 

Recovery, and Enforcement Act (“FIRREA”), the False Claims Act, the Racketeer Influenced and 

Corrupt Organizations Act, the Real Estate Settlement Procedures Act, the Fair Credit Reporting 

Act, the Fair Debt Collection Practices Act, the Truth in Lending Act, the Interstate Land Sales 

Full Disclosure Act, 15 U.S.C. § 1691(d) (“Reason for Adverse Action”) or § 1691(e) 

(“Appraisals”), sections 502 through 509 (15 U.S.C. § 6802-6809) of the Gramm-Leach Bliley 

Act except for section 505 (15 U.S.C. § 6805) as it applies to section 501(b) (15 U.S.C. § 

6801(b)), or that the Civil Division of the United States Department of Justice has actual and 

present authority to assert and compromise pursuant to 28 C.F.R. § 0.45. 

(b) Subject to the exceptions in Paragraph 11 (concerning excluded 

claims) below, the United States fully and finally releases the COMPANY and any current or 

former affiliated entity (to the extent the COMPANY retains liabilities associated with such 

former affiliated entity), and any of their respective successors or assigns, as well as any current 

or former director, current or former officer, or current or former employee of any of the 

foregoing, individually and collectively, from any civil or administrative claims the United States 

has or may have, and from any civil or administrative remedies or penalties (expressly including 

punitive or exemplary damages) it may seek or impose, based on the Covered Origination 

Conduct that has taken place as of 11:59 p.m., Eastern Standard Time, on February 8, 2012, under 

the Real Estate Settlement Procedures Act, the Fair Credit Reporting Act, the Truth in Lending 

Act, 15 U.S.C. § 1691(d) (“Reason for Adverse Action”) or § 1691(e) (“Appraisals”), or the 

Interstate Land Sales Full Disclosure Act.

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(c) Subject to the exceptions in Paragraph 11 (concerning excluded 

claims) below, the United States fully and finally releases the COMPANY and any current or 

former affiliated entity (to the extent the COMPANY retains liability associated with such former 

affiliated entity), and any of their respective successors or assigns, as well as any current or 

former director, current or former officer, and current or former employee of any of the foregoing, 

individually and collectively, from any civil or administrative claims the United States has or may 

have, and from any civil or administrative remedies or penalties (expressly including punitive or 

exemplary damages) it may seek to impose under FIRREA based on the Covered Origination 

Conduct only to the extent that:

(i) such claim is (A) based upon false, misleading or 

fraudulent representations (or a scheme to defraud consisting solely of such a 

false, misleading or fraudulent representation) made by the COMPANY or 

affiliated entity as of 11:59 p.m., Eastern Standard Time, on February 8, 2012, to 

a borrower in connection with the COMPANY’s or affiliated entity’s making of a 

residential mortgage loan to such borrower; or (B) an action pursuant to 12 U.S.C. 

§ 1833a(c)(2) in which the action is consisting solely of the allegation that the 

COMPANY or one of its affiliated entities made a false statement or 

misrepresentation (or engaged in a scheme to defraud based solely upon such a 

false statement or misrepresentation) to the COMPANY or another affiliated 

entity, as of 11:59 p.m., Eastern Standard Time, on February 8, 2012, in 

connection with the COMPANY’s or affiliated entity’s making of a residential 

mortgage loan to a borrower; and

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(ii) (A) the only federally insured financial institution that was 

affected by the statement or misrepresentation (or scheme), or by actions based 

on, incorporating, or omitting the statement or misrepresentation (or scheme) was 

the COMPANY or an affiliated entity; (B) the false statement or 

misrepresentation (or scheme) was not made to, directed at, or part of a scheme to 

defraud, any person or entity other than or in addition to the borrower and/or the 

COMPANY or an affiliated entity, including, but not limited to, any other 

financial institution (as defined in 18 U.S.C. § 20), investors, and governmental 

entities; (C) the false statement or misrepresentation (or scheme), or actions based 

on, incorporating, or omitting the statement or misrepresentation (or scheme) did 

not harm any other financial institution (as defined in 18 U.S.C. § 20), investors, 

governmental entities, or any other entities other than the COMPANY or an 

affiliated entity; and (D) there was no material monetary effect on an agency of 

the United States. 

(3)

(a) Subject to the exceptions in Paragraph 11 (concerning excluded 

claims) below, the United States Department of Housing and Urban Development fully and 

finally releases the COMPANY and any current or former affiliated entity (to the extent the 

COMPANY retains liabilities associated with such former affiliated entity), and any of their 

respective successors or assigns, as well as any current or former director, current or former 

officer, and current or former employee of any of the foregoing, individually and collectively, 

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from any civil or administrative claims it has or may have, and from any civil or administrative 

remedies or penalties (expressly including punitive or exemplary damages) it may seek or impose, 

based on the Covered Servicing Conduct with respect to FHA loans that has taken place as of 

11:59 p.m., Eastern Standard Time, on February 8, 2012 (and, for the avoidance of doubt, with 

respect to FHA-insured loans, whether or not a claim for mortgage insurance benefits has been or 

is in the future submitted). Notwithstanding the foregoing, in no instance shall this Release 

relieve the COMPANY or any affiliated entity from the obligation to remedy, upon identification, 

defects of title or such other problems caused by the acts or omissions of the COMPANY or any 

affiliated entity that may preclude FHA from accepting assignment or paying a claim for which 

FHA lacks statutory authority pursuant to 12 U.S.C. § 1707(a) and § 1710(a)(1)(B), in which case 

FHA shall reconvey the property back to the COMPANY or the affiliated entity to remedy the 

defect in title or such other problem and the COMPANY or the affiliated entity shall convey the 

property back to FHA once the defect or problem is cured. Further, nothing in this Release shall 

relieve COMPANY or affiliated entity of any obligation to provide FHA with any and all 

mortgage insurance premium payments that have been or should have been collected, plus 

interest, if any. Notwithstanding any other provision of this Release, FHA shall calculate the 

payment of insurance benefits for any insured mortgage in accordance with its regulations.

(b) Subject to the exceptions in Paragraph 11 (concerning excluded 

claims) below, the United States fully and finally releases the COMPANY and any current or 

former affiliated entity (to the extent the COMPANY retains liabilities associated with such 

former affiliated entity), and any of their respective successors or assigns, as well as any current 

or former director, current or former officer, and current or former employee of any of the 

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foregoing, individually and collectively, from any civil or administrative claims it has or may 

have and from any civil or administrative remedies or penalties (expressly including punitive or 

exemplary damages) it may seek or impose under FIRREA, the False Claims Act, and the 

Program Fraud Civil Remedies Act where the sole basis for such claim or claims is that the 

COMPANY or any current or former affiliated entity (to the extent the COMPANY retains 

liabilities associated with such former affiliated entity) or any of their respective successors or 

assigns, submitted to HUD-FHA prior to 11:59 p.m., Eastern Standard Time, on February 8, 2012 

a false or fraudulent annual certification that the mortgagee had “conform[ed] to all HUD-FHA 

regulations necessary to maintain its HUD-FHA approval” (including, but not limited to, the 

requirement that the mortgagee implement and maintain a quality control program that conforms 

to HUD-FHA requirements), or “complied with and agree[d] to continue to comply with HUDFHA regulations, handbooks, Mortgagee Letters, Title I Letters, policies, and terms of any 

agreements entered into with the Department under HUD’s Direct Endorsement Program.” For 

avoidance of doubt, this Paragraph means that the United States is barred from asserting that a 

false annual certification renders the COMPANY or any current or former affiliated entity (to the 

extent the COMPANY retains liabilities associated with such former affiliated entity) liable under 

the False Claims Act and the other laws cited above for loans endorsed by the COMPANY or its

affiliated entity for FHA insurance during the period of time applicable to the annual certification 

without regard to whether any such loans contain material violations of HUD-FHA requirements, 

or that a false individual loan certification that “this mortgage is eligible for HUD mortgage 

insurance under the Direct Endorsement program” renders the COMPANY or any current or 

former affiliated entity (to the extent the COMPANY retains liabilities associated with such 

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former affiliated entity) liable under the False Claims Act for any individual loan that does not 

contain a material violation of HUD-FHA requirements. However, this Paragraph does not (i) 

release, bar or otherwise preclude the right of the United States to pursue any civil or 

administrative claims or remedies it has or may have, or release or preclude under res judicata or 

collateral estoppel theories any civil or administrative remedies or penalties it may seek or 

impose, against the COMPANY, any current or former affiliated entity (to the extent the 

COMPANY retains liabilities associated with such former affiliated entity), and any of their 

respective successors or assigns, for conduct with respect to the insurance of residential mortgage 

loans that violates any laws, regulations or other HUD-FHA requirements applicable to the 

insurance of residential mortgage loans by HUD, including, but not limited to, material violations 

of any applicable HUD-FHA requirements with respect to an individual loan or loans, except if 

and to the extent such claim, remedy or penalty is based solely on such entity’s failure to provide 

HUD with an accurate annual certification as described above; (ii) release or otherwise bar the 

United States from introducing evidence of any alleged failure to comply with applicable HUDFHA requirements, including, but not limited to, sufficient quality control, underwriting or due 

diligence programs, in any way (including, but not limited to, for the purpose of proving intent) in 

connection with any claim that there was a material violation(s) of applicable HUD-FHA 

requirements with respect to an individual loan or loans that would subject the COMPANY or an 

affiliated entity to liability under the False Claims Act or any other federal statutory or common 

law administrative or judicial claim; or (iii) permit the COMPANY or its affiliates to offset or 

otherwise reduce any potential liability for such claims or remedies by any amount paid under the 

Consent Judgment. The parties agree that the issue of whether and to what extent the United

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States may use statistical sampling of individual loans or similar techniques for calculating 

damages or proving material violations of HUD-FHA underwriting requirements with respect to a 

pool of loans is not addressed by the Consent Judgment and shall be governed by the law of the 

relevant administrative or judicial forum of any future dispute. Notwithstanding the foregoing, in 

no instance shall this Release relieve the COMPANY or any affiliated entity from the obligation 

to remedy, upon identification, defects of title or such other problems caused by the acts or 

omissions of the COMPANY or an affiliated entity that may preclude FHA from accepting 

assignment or paying a claim for which FHA lacks statutory authority pursuant to 12 U.S.C. § 

1707(a) and § 1710(a)(1)(B), in which case FHA shall reconvey the property back to the 

COMPANY or affiliated entity to remedy the defect in title or such other problem and the 

COMPANY or affiliated entity shall convey the property back to FHA once the defect or problem 

is cured.

(4) Subject to the exceptions in Paragraph 11 (concerning excluded claims) 

below, for loans that closed before 11:59 p.m., Eastern Standard Time, on February 8, 2012 and 

are guaranteed by the Department of Veterans Affairs (VA), the United States fully and finally

releases the COMPANY and any current or former affiliated entity (to the extent the 

COMPANY retains liabilities associated with such former affiliated entity), and any of their 

respective successors or assigns, as well as any current or former director, current or former 

officer, and current or former employee of any of the foregoing, individually and collectively, 

from any civil or administrative claims it has or may have based on Covered Origination 

Conduct that arises under FIRREA, the False Claims Act, or the Program Fraud Civil Remedies 

Act to the extent that they are based on any failure by the COMPANY or any current or former 

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affiliated entity and any of their respective successors or assigns, as well as any current or former 

director, current or former officer, and current or former employee of any of the foregoing, 

individually and collectively, to conform to all VA regulations necessary to maintain the 

authority of the COMPANY or any current or former affiliated entity to close VA-guaranteed 

loans on an automatic basis. Nothing in the foregoing shall be interpreted to release the right of 

the United States to pursue any civil or administrative claims it has or may have, or to release 

any civil or administrative remedies or penalties it may seek or impose, against the COMPANY,

any current or former affiliated entity (to the extent the COMPANY retains liabilities associated 

with such former affiliated entity), and any of their respective successors or assigns, based on 

Covered Origination Conduct that violates the laws or regulations applicable to the guaranty of 

residential mortgage loans by VA with respect to any residential mortgage loan or loans, except 

if and to the extent such claim, remedy or penalty is based on such entity’s failure to provide VA 

with an accurate general program compliance certification, to implement an effective quality 

control plan, or to conform to all VA regulations necessary to maintain the authority of the 

COMPANY or any current or former affiliated entity to close VA-guaranteed loans on an 

automatic basis.

(5) Subject to the exceptions in Paragraph 11 (concerning excluded claims) 

below, for loans that closed before 11:59 p.m., Eastern Standard Time, on February 8, 2012 and 

are guaranteed by the Department of Agriculture (USDA), the United States fully and finally

releases the COMPANY and any current or former affiliated entity (to the extent the 

COMPANY retains liabilities associated with such former affiliated entity), and any of their 

respective successors or assigns, as well as any current or former director, current or former 

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officer, and current or former employee of any of the foregoing, individually and collectively, 

from any civil or administrative claims it has or may have against the COMPANY and any of 

their respective successors or assigns, as well as any current or former director, current or former 

officer, and current or former employee of any of the foregoing, individually and collectively, 

based on Covered Origination Conduct that arises under FIRREA, the False Claims Act, or the 

Program Fraud Civil Remedies Act to the extent that they are based on statements made in the 

COMPANY’s or current or former affiliated entity’s application for approved lender status in the 

Single Family Housing Guaranteed Loan Program. Nothing in the foregoing shall be interpreted 

to release the right of the United States to pursue any civil or administrative claims it has or may 

have, or to release any civil or administrative remedies or penalties it may seek or impose, 

against the COMPANY, any current or former affiliated entity (to the extent the COMPANY

retains liabilities associated with such former affiliated entity), and any of their respective 

successors or assigns, based on Covered Origination Conduct that violates the laws or 

regulations applicable to the guaranty of residential mortgage loans by USDA with respect to any 

residential mortgage loan or loans, except if and to the extent such claim, remedy or penalty is 

based on such entity’s failure to provide USDA with an accurate general program compliance 

certification, to implement an effective quality control plan, or on statements made in the 

COMPANY’s or current or former affiliated entity’s application for approved lender status in the 

Single Family Housing Guaranteed Loan Program.

(6) Subject to the exceptions described in this Paragraph 6 and in Paragraph 

11 (concerning excluded claims) below, the United States Department of the Treasury

(“Treasury”) fully and finally releases the COMPANY and any current or former affiliated entity 

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(to the extent the COMPANY retains liabilities associated with such former affiliated entity), and 

any of their respective successors or assigns, as well as any current or former director, current or 

former officer, and current or former employee of any of the foregoing, individually and 

collectively, and will refrain from instituting, directing, or maintaining any civil or 

administrative claims the Treasury has or may have, and from any civil remedies or penalties 

(expressly including punitive or exemplary damages) it may seek or impose against the 

COMPANY and any current or former affiliated entity (to the extent the COMPANY retains 

liabilities associated with such former affiliated entity), and any of their respective successors or 

assigns, as well as any current or former director, current or former officer, and current or former 

employee of any of the foregoing, individually and collectively, based on the Covered Servicing 

Conduct that has taken place as of 11:59 p.m., Eastern Standard Time, on February 8, 2012; 

furthermore, as of February 8, 2012, Treasury is withholding Making Home Affordable servicer 

incentive payments from the COMPANY or any current or former affiliated entity, and, upon the 

immediately succeeding Making Home Affordable Program incentive payment date, Treasury 

shall release and remit to the COMPANY and any current or former affiliated entity all 

outstanding Making Home Affordable Program servicer incentive payments previously withheld 

by Treasury. Notwithstanding the foregoing, Treasury, in connection with the Making Home 

Affordable Program, reserves the right to continue to perform compliance reviews on the 

COMPANY’s Making Home Affordable Program activities occurring prior to February 8, 2012, 

to require non-financial remedies with respect to such activities, and to publicly release servicer 

assessments with respect thereto. If, as the result of any such compliance review occurring after 

February 8, 2012, Treasury determines that the COMPANY or any of its affiliated entities have 

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not adequately corrected identified instances of noncompliance that occurred prior to the date 

specified in the first sentence of this Paragraph and were communicated to COMPANY or any of 

its affiliated entities by Treasury in a letter dated March 9, 2012, Treasury reserves the right to 

adjust any Making Home Affordable Program incentive payments made or owed to the 

COMPANY or any of its affiliated entities with respect to those identified instances of 

noncompliance. In addition, with respect to instances of noncompliance that occur after 

February 8, 2012, Treasury reserves the right to exercise all available remedies, both financial 

and non-financial, under the Making Home Affordable Program Commitment to Purchase 

Financial Instrument and Servicer Participation Agreement, as amended, between Treasury and 

COMPANY or any of its affiliated entities (“the SPA”).

(7) Subject to the exceptions in Paragraph 11 (concerning excluded claims) 

below, the Bureau of Consumer Financial Protection (“CFPB”) fully and finally releases the 

COMPANY and any current or former affiliated entity (to the extent such COMPANY retains 

liabilities associated with such former affiliated entity), and any of their respective successors or 

assigns as well as any current or former director, current or former officer, and current or former 

employee of any of the foregoing, individually and collectively, and will refrain from instituting, 

directing, or maintaining any civil or administrative claims the CFPB has or may have, and from 

any civil remedies or penalties (expressly including punitive or exemplary damages) it may seek 

or impose against the COMPANY and any current or former affiliated entity (to the extent the 

COMPANY retains liabilities associated with such former affiliated entity), and any of their 

respective successors or assigns, as well as any current or former director, current or former 

officer, or current or former employee of any of the foregoing, individually and collectively, 

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based on Covered Servicing Conduct or Covered Origination Conduct that has taken place prior 

to July 21, 2011. Notwithstanding the foregoing, the CFPB reserves the right to obtain 

information related to conduct that occurred prior to July 21, 2011 under its authority granted by 

Title X of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

(8) Subject to the exceptions in Paragraph 11 (concerning excluded claims) 

below, and conditioned upon the full payment of the Direct Payment Settlement Amount, the 

Federal Trade Commission fully and finally releases the COMPANY and any current or former 

affiliated entity (to the extent the COMPANY retains liabilities associated with such former 

affiliated entity), and any of their respective successors or assigns, as well as any current or 

former director, current or former officer, and current or former employee of any of the 

foregoing, individually and collectively, from any civil or administrative claim the Federal Trade 

Commission has or may have, or civil or administrative remedies or penalties (expressly 

including punitive or exemplary damages) it may seek or impose, based on the Covered 

Origination Conduct that has taken place as of 11:59 p.m., Eastern Standard Time, on February 

8, 2012, or based on the Covered Servicing Conduct that has taken place as of 11:59 p.m., 

Eastern Standard Time, on February 8, 2012, provided, however, that nothing in this Paragraph 

or Release shall be interpreted to release any liability to the Federal Trade Commission relating 

to the Covered Servicing Conduct or Covered Origination Conduct of any affiliated entity that 

the COMPANY has acquired on or after November 30, 2011, or, notwithstanding Section C.3.i 

of this Release, any conduct or claims involving the privacy, security, or confidentiality of 

consumer information.

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(9) Subject to the exceptions in Paragraph 11 (concerning excluded claims) 

below:

(a) Upon the Effective Date of the Consent Judgment, the Executive 

Office for United States Trustees (“EOUST”) and the United States Trustees and Acting United 

States Trustees for Regions 1 through 21 (collectively, with the EOUST, “the United States 

Trustees”) will consent to and agree to take such steps as may be reasonably necessary to fully 

and finally withdraw or facilitate the dismissal with prejudice of pending objections and other 

actions by the United States Trustees, including all related discovery requests, whether formal or 

informal, and requests for examination under Fed. R. Bankr. P. 2004 (collectively, “the Discovery 

Requests”) and subpoenas or subpoenas duces tecum (collectively, “the Subpoenas”), directed to 

or filed against the COMPANY, its affiliates, and employees and officers of the COMPANY and 

its affiliates, pertaining to the COMPANY’s or its affiliates’ mortgage-related claims filed in a 

bankruptcy case prior to 11:59 p.m., Eastern Standard Time, on February 8, 2012 and based on 

the Covered Bankruptcy Conduct. The United States Trustees further agree not to take any action 

to obtain discovery from the COMPANY or any affiliated entity pursuant to any court order 

granting such Discovery Requests or with respect to enforcing related Subpoenas pending as of 

11:59 p.m., Eastern Standard Time, on February 8, 2012. Upon the Effective Date of the Consent 

Judgment, the United States Trustees further agree to take such steps as may be reasonably 

necessary to fully and finally withdraw or facilitate the dismissal with prejudice of Discovery 

Requests and Subpoenas directed to or filed against any other party where the discovery was 

sought for the purpose of obtaining relief against the COMPANY, its affiliates, or employees and 

officers of the COMPANY or its affiliates, and pertains to the COMPANY’s or its affiliates’ 

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mortgage-related claims filed in a bankruptcy case prior to 11:59 p.m., Eastern Standard Time, on 

February 8, 2012 and based on the Covered Bankruptcy Conduct, except that nothing in this 

Paragraph requires the United States Trustee to withdraw or facilitate the dismissal of Discovery 

Requests and Subpoenas to the extent that relief against another party, other than the COMPANY,

its affiliates, or employees and officers of the COMPANY or its affiliates, is the purpose of such 

discovery. 

(b) Upon the Effective Date of the Consent Judgment, the COMPANY

and its affiliated entities will consent to and agrees to take such steps as may be reasonably 

necessary to fully and finally withdraw or facilitate the dismissal with prejudice of pending 

adversary proceedings, contested matters, appeals, and other actions filed by the COMPANY or 

its affiliated entities, including all Discovery Requests and Subpoenas directed to or filed against 

any United States Trustee, relating to objections and other actions by the United States Trustees, 

including Discovery Requests and Subpoenas, directed to or filed against the COMPANY, its 

affiliated entities, or employees and officers of the COMPANY or its affiliated entities pertaining 

to the COMPANY’s or its affiliated entities’ mortgage-related claims filed in a bankruptcy case 

prior to 11:59 p.m., Eastern Standard Time, on February 8, 2012 and based on the Covered 

Bankruptcy Conduct. The COMPANY and its affiliated entities further agree not to take any 

action to obtain discovery from the United States Trustees pursuant to any court order granting 

such Discovery Requests or with respect to enforcing related Subpoenas pending as of 11:59 p.m., 

Eastern Standard Time, on February 8, 2012. 

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(c) The United States Trustees fully and finally release any claims, 

and will refrain from instituting, directing or maintaining any action or participating in any action 

by a third party (except that the United States Trustees may participate in an action to the extent 

ordered by a court provided that the United States Trustees may not seek such a court order 

formally or informally), against the COMPANY and any current or former affiliated entity (to the 

extent the COMPANY retains liabilities associated with such former affiliated entity), and any of 

their respective successors or assigns, as well as any current or former director, current or former 

officer, and current or former employee of any of the foregoing, individually and collectively, 

pertaining to the COMPANY’s or its affiliated entities’ mortgage-related claims filed in a 

bankruptcy case prior to 11:59 p.m., Eastern Standard Time, on February 8, 2012 and based on 

the Covered Bankruptcy Conduct. The United States Trustees shall refrain from sharing 

information obtained via the Discovery Requests and Subpoenas outside the federal government 

(unless required to do so under applicable law or pursuant to a court order) in support of any 

action, against the COMPANY, or any current or former affiliated entity (to the extent the 

COMPANY retains liabilities associated with such former affiliated entity), and any of their 

respective successors or assigns, as well as any current or former director, current or former 

officer, and current or former employee of any of the foregoing, individually and collectively, 

pertaining to the COMPANY’s or its affiliated entities’ mortgage-related claims filed in a 

bankruptcy case prior to 11:59 p.m., Eastern Standard Time, on February 8, 2012 and based on 

the Covered Bankruptcy Conduct. Except as otherwise provided in the Enforcement Terms in 

Exhibit E of the Consent Judgment, the United States Trustees further agree to refrain from 

seeking to invalidate the COMPANY’s or its affiliates’ lien on residential real property, including 

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in an adversary proceeding pursuant to Fed. R. Bank. P. 7001(2) and 11 U.S.C. § 506, or to 

impose monetary sanctions or other punitive relief against the COMPANY, and any current or 

former affiliated entity (to the extent the COMPANY retains liabilities associated with such 

former affiliated entity), and any of their respective successors or assigns, as well as any current 

or former director, current or former officer, and current or former employee of any of the 

foregoing, individually and collectively, pertaining to the COMPANY’s or its affiliated entities 

mortgage-related claims filed in a bankruptcy case after 11:59 p.m., Eastern Standard Time, on 

February 8, 2012 and based on the Covered Bankruptcy Conduct where the Covered Bankruptcy 

Conduct occurred before 11:59 p.m., Eastern Standard Time, on February 8, 2012.

(d) Notwithstanding the foregoing, nothing in this Paragraph shall be 

construed to be (1) a waiver of any defenses or claims of the COMPANY, its affiliates, or 

employees and officers of the COMPANY or its affiliates, against any other party, or a dismissal 

of any pending adversary proceedings, contested matters, appeals, and other actions filed by the 

COMPANY, its affiliates, or employees and officers of the COMPANY or its affiliates, against 

any other party, wherein the United States Trustee is a party or otherwise involved; (2) a waiver 

of any defenses or claims of the United States Trustee against any other party, or a dismissal of 

any pending adversary proceedings, contested matters, appeals, and other actions filed by the 

United States Trustee against any other party wherein the COMPANY, its affiliates, or employees 

and officers of the COMPANY or its affiliates, is a party or otherwise involved; or (3) a waiver 

of, or restriction or prohibition on, the United States Trustees’ ability, to the extent permitted by 

law, informally or formally, in individual bankruptcy cases, to seek a cure of material 

inaccuracies in the COMPANY’s or its affiliates’ mortgage-related claims filed in a bankruptcy 

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case and based on the Covered Bankruptcy Conduct, but not to impose monetary sanctions or 

other punitive relief against the COMPANY or its affiliates in addition to such cure; provided, 

however, that this provision shall not constitute a waiver of, or restriction or prohibition on, the 

COMPANY’s or its affiliates’ ability to dispute whether the United States Trustees have authority 

or ability to seek such a cure.

(10) For the purposes of this Release, the term “affiliated entity” shall mean 

entities that are directly or indirectly controlled by, or control, or are under common control with, 

the COMPANY as of or prior to 11:59 p.m., Eastern Standard Time, on February 8, 2012. The 

term “control” with respect to an entity means the beneficial ownership (as defined in Rule 13d-3

promulgated under the Securities Exchange Act of 1934, as amended) of 50 percent or more of 

the voting interest in such entity.

(11) Notwithstanding any other term of this Release, the following claims of 

the United States are specifically reserved and are not released:

(a) Any liability arising under Title 26, United States Code (Internal 

Revenue Code);

(b) Any liability of individuals (including current or former directors, 

officers, and employees of the COMPANY or any affiliated entity) who have received or receive 

in the future notification that they are the target of a criminal investigation (as defined in the 

United States Attorneys’ Manual); have been or are indicted or charged; or have entered or in the 

future enter into a plea agreement, based on the Covered Servicing Conduct, the Covered 

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Origination Conduct, and the Covered Bankruptcy Conduct (collectively, the “Covered 

Conduct”);

(c) Any criminal liability;

(d) Any liability to the United States for any conduct other than the 

Covered Conduct, or any liability for any Covered Conduct that is not expressly released herein;

(e) Any and all claims whether legal or equitable, in connection with 

investors or purchasers in or of securities or based on the sale, transfer or assignment of any 

interest in a loan, mortgage, or security to, into, or for the benefit of a mortgage-backed security, 

trust, special purpose entity, financial institution, investor, or other entity, including but not 

limited to in the context of a mortgage securitization or whole loan sale to such entities 

(“Securitization/Investment Claims”). Securitization/Investment Claims include, but are not 

limited to, claims based on the following, all in connection with investors or purchasers in or of 

securities or in connection with a sale, transfer, or assignment of any interest in loan, mortgage or 

security to, into, or for the benefit of a mortgage-backed security, trust, special purpose entity, 

financial institution, investor, or other entity:

(i) The United States’ capacity as an owner, purchaser, or 

holder of whole loans, securities, derivatives, or other similar investments, 

including without limitation, mortgage backed securities, collateralized debt 

obligations, or structured investment vehicles.

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(ii) The creation, formation, solicitation, marketing, 

assignment, transfer, valuation, appraisal, underwriting, offer, sale, substitution, 

of or issuance of any interest in such whole loans, mortgages, securities, 

derivatives, or other similar investments.

(iii) Claims that the COMPANY or an affiliated entity made 

false or misleading statements or omissions, or engaged in other misconduct in 

connection with the sale, transfer or assignment of any interest in a loan, 

mortgage, or security or in connection with investors or purchasers in or of such 

loans, mortgages, or securities, including but not limited to conduct that affected a 

federally insured financial institution or violated a legal duty to a mortgagebacked security, trust, special purpose entity, financial institution, or investor 

(including the United States), or governmental agency and/or that subjects the 

COMPANY or an affiliated entity to a civil penalty or other remedy under 12 

U.S.C. § 1833a.

(iv) Representations, warranties, certifications, statements, or 

claims made regarding such whole loans, securities, derivatives or other similar 

investments, including representations, warranties, certifications or claims 

regarding the eligibility, characteristics, or quality of mortgages or mortgagors;

(v) Activities related to the executing, notarizing, transferring 

or recording of mortgages; the endorsement or transfer of a loan; and the 

obtaining, executing, notarizing, transferring or recording of assignments;

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(vi) Obtaining, securing, updating, transferring, or providing 

promissory notes or endorsements of promissory notes through allonges or 

otherwise;

(vii) Custodial and trustee functions;

(viii) Intentional or fraudulent failure to pay investors sums owed 

with respect to any security, derivatives, or similar investment;

(ix) Contractual covenants, agreements, obligations and legal 

duties to a mortgage-backed security, trust, special purpose entity, financial 

institution, investor, or other entity (including the United States);

(x) Covered Origination Conduct (except to the extent such 

conduct is released in Paragraphs 3.b, 4 or 5); and

(xi) Covered Servicing Conduct to the extent the COMPANY

or any affiliated entity engaged in the Covered Servicing Conduct in question not 

in its capacity as servicer, subservicer or master servicer, but in its capacity as the 

originator of a mortgage loan or as seller, depositor, guarantor, sponsor, 

securitization trustee, securities underwriter, document custodian or any other 

capacity.

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The exclusion set forth above in this Paragraph shall not apply to 

Securitization/Investment Claims based on the following conduct, and such claims are included 

in what is being released:

Securitization/Investment Claims based on Covered Servicing Conduct by the 

COMPANY or any current or former affiliated entity where: (1) such conduct was 

performed by the COMPANY or any affiliated entity in its capacity as the loan 

servicer, master servicer or subservicer, whether conducted for its own account or 

pursuant to a third party servicing agreement or similar agreement, and not in its 

capacity as loan originator, seller, depositor, guarantor, sponsor, securitization 

trustee, securities underwriter, or any other capacity; and (2) such conduct was not 

in connection with (x) the creation, formation, solicitation, marketing, sale, 

assignment, transfer, offer, sale, substitution, underwriting, or issuance of any 

interest in securities, derivatives or other similar investments or (y) the sale or 

transfer of mortgage loans. The claims addressed in this sub-paragraph include, 

without limitation, Securitization and Investment Claims that the party seeking to 

enforce a mortgage loan against a borrower and homeowner in respect of that 

borrower’s default did not have a documented enforceable interest in the 

promissory note and mortgage or deed of trust under applicable state law or is 

otherwise not a proper party to the foreclosure or bankruptcy action or claims 

based on such party’s attempts to obtain such a documented enforceable interest 

or become such a proper party.

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(f) Any liability arising under Section 8 of the Real Estate Settlement 

Procedures Act, 12 U.S.C. § 2607, relating to private mortgage insurance, with respect to claims 

brought by the CFPB;

(g) Except with respect to claims related to the delivery of initial or 

annual privacy notices, requirements with respect to the communication of non-public personal 

information to non-affiliated third parties, or other conduct required by Sections 502 through 509 

of the Gramm-Leach-Bliley Act (15 U.S.C. §§ 6802-6809), any claims or conduct involving the 

obligation of a financial institution under Section 501(b) of the Gramm-Leach-Bliley Act (15 

U.S.C. s. 6801(b)) and its implementing regulations to maintain administrative, technical, and 

physical information security safeguards;

(h) Any liability arising under the Fair Housing Act; any provision of 

the Equal Credit Opportunity Act that is not expressly released in Paragraph 2 of this Release, 

including any provision prohibiting discriminatory conduct; the Home Mortgage Disclosure Act;

or any other statute or law that prohibits discrimination of persons based on race, color, national 

origin, gender, disability, or any other protected status;

(i) Administrative claims, proceedings, or actions brought by HUD 

against any current or former director, officer, or employee for suspension, debarment or 

exclusion from any HUD program;

(j) Any liability arising under the federal environmental laws;

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(k) Any liability to or claims brought by (i) the Federal Housing 

Finance Agency; (ii) any Government Sponsored Enterprise, including the Federal National 

Mortgage Association and the Federal Home Loan Mortgage Corporation (except where the 

Government Sponsored Enterprise seeks to impose such liability or pursue such claims in its 

capacity as an administrator of the Making Home Affordable Program of Treasury); (iii) the 

Federal Deposit Insurance Corporation (whether in its capacity as a Corporation, Receiver, or 

Conservator); (iv) the Government National Mortgage Association (“Ginnie Mae”) arising out of 

COMPANY’s contractual obligations related to serving as Master Subservicer on defaulted 

Ginnie Mae portfolios, including claims for breach of such obligations; (v) the CFPB with respect 

to claims within its authority as of the designated transfer date of July 21, 2011 that are not 

expressly released in Paragraph 7; (vi) the National Credit Union Administration, whether in its 

capacity as a Federal agency, Liquidating Agent, or Conservator; (vii) the Securities and 

Exchange Commission; (viii) the Federal Reserve Board and its member institutions; (ix) Maiden 

Lane LLC, Maiden Lane II LLC, Maiden Lane III LLC, entities that are consolidated for 

accounting purposes on the financial statements of the Federal Reserve Bank of New York, and 

the Federal Reserve Bank of New York; (x) the Office of the Comptroller of the Currency; (xi) 

the USDA (except to the extent claims are released in Paragraph 5); (xii) the VA (except to the 

extent claims are released in Paragraph 4); (xiii) the Commodity Futures Trading Commission; 

and (xvi) the Inspectors General of such entities; 

(l) Any liability to the United States for the following claims alleged 

against Wells Fargo, Inc., or any of its current or former subsidiaries, affiliates, officers, directors, 

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employees or agents, including but not limited to Wells Fargo Bank, National Association, or any 

other entity or person:

(i) All claims or allegations based on any conduct alleged in 

United States ex rel. [Under Seal] v. [Under Seal], 2:11-cv-00535-RLH-RJJ (D. 

Nev.);

(ii) All claims or allegations based on any conduct alleged in 

United States ex rel. Szymoniak v. [Under Seal], Civ. No. 0:10-cv-01465 (D.S.C.) 

or in United States ex rel. Szymoniak v. [Under Seal], Civ. No. 3:10-cv-575 

(W.D.N.C.), except any such claims that are encompassed by the releases

described in paragraphs 2 to 9, above, and not otherwise reserved from these 

releases in this agreement;

(iii) All claims or allegations based on any conduct alleged in 

United States ex rel. Bibby et al. v. Wells Fargo Bank, National Association, Inc. 

et al., C.A. No. 1:06-CV-0547-AT (N.D. Ga.); and

(iv) All claims or allegations based on any conduct alleged in 

United States of America ex rel. John Doe and Richard Roe v. Wells Fargo, C.A. 

No. CV-11-5457 (E.D.N.Y.);

(m) Any action that may be taken by the appropriate Federal Banking 

Agency (FBA), as defined in 12 U.S.C. § 1813(q), against COMPANY, any of its affiliated 

entities, and/or any institution-affiliated party of COMPANY, as defined in 12 U.S.C. § 1813(u), 

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pursuant to 12 U.S.C. § 1818, and any action by the FBA to enforce the Consent Order issued 

against the COMPANY by the FBA on April 13, 2011;

(n) Any liability based upon obligations created by this Consent 

Judgment;

(o) The parties agree that notwithstanding any other provision of this 

Release, the United States retains the right to investigate and sue the COMPANY and any 

affiliated entity under FIRREA for any conduct, statements or omissions that are:

(i) Made or undertaken in connection with either (a) the 

creation, formation, transfer, sale, conveyance, or securitization of mortgagebacked securities, derivatives, collateralized debt obligations and credit default 

swaps, or other similar securities or (b) the sale or transfer of mortgage loans;

(ii) Made or undertaken by the COMPANY or an affiliated 

entity in its capacity as loan originator, seller, depositor, guarantor, sponsor, 

securitization trustee, securities underwriter, or any capacity other than as loan 

servicer, master servicer or subservicer, in connection with the origination 

(including Covered Origination Conduct), underwriting, due diligence, quality 

control, valuation, appraisal, pledging, substitution, recording, assignment, or 

securitization of mortgages, whole loans, mortgage-backed securities, derivatives, 

collateralized debt obligations and credit default swaps, or other similar securities 

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(except to the extent such conduct is released in Paragraphs 2.c, 3.b, 4 or 5 and 

not excluded from this Release in Subsections (a)-(n) of this Paragraph 11);

(iii) Made to or directed at federal governmental entities (except 

to the extent such conduct is released in Paragraphs 2.a, 3.a, 3.b, 4 or 5 and not 

excluded from this Release in Subsections (a)-(n) of this Paragraph 11); or

(iv) Based on (A) the failure by the COMPANY or affiliated 

entity to pay investors or trustees any sums received by the COMPANY or 

affiliated entity and owed to the investors and trustees with respect to any 

security, derivatives, or similar investment; (B) the failure by the COMPANY or 

affiliated entity to disclose that it failed to pay investors or trustees any sums 

received by the COMPANY or affiliated entity and owed to investors or trustees 

with respect to any security, derivatives, or similar investment; (C) the collection 

by the COMPANY or affiliated entity of money or other consideration from loan 

sellers with respect to loans that the COMPANY or an affiliated entity had sold to 

others or packaged into a security for sale to others; or (D) the failure by the 

COMPANY or affiliated entity to repurchase loans to the extent that it had a 

contractual obligation to repurchase.

The COMPANY and its affiliated entities agree that they have not been released from any 

liability under FIRREA for such conduct or statements. To the extent that this reservation of 

FIRREA claims is inconsistent with any other provision of this Release, the reservation of 

FIRREA claims shall control. This reservation of FIRREA Claims shall not be construed to 

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GARCIA 04439
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otherwise limit any other claim that the United States has against the COMPANY or its affiliated 

entities, to alter the requirements of FIRREA, or to waive any defense available to the 

COMPANY or its affiliated entities under existing law.

(12) For avoidance of doubt, this Release shall not preclude a claim by any 

private individual or entity for harm to that private individual or entity, except for a claim 

asserted by a private individual or entity under 31 U.S.C. § 3730(b) that is subject to this Release 

and not excluded by Paragraph 11.

(13) The COMPANY and its affiliated entities waive and shall not assert any 

defenses they may have to any criminal prosecution or administrative action based on the 

Covered Conduct that may be based in whole or in part on a contention that, under the Double 

Jeopardy Clause in the Fifth Amendment of the Constitution or under the Excessive Fines Clause 

in the Eighth Amendment of the Constitution, this Release bars a remedy sought in such criminal 

prosecution or administrative action. Nothing in this Paragraph or any other provision of this 

Consent Judgment constitutes an agreement by the United States concerning the characterization 

of the Federal Settlement Amount for purposes of Title 26, United States Code (Internal Revenue 

Code).

(14) The COMPANY and any current or former affiliated entity, as well as any 

current or former director, current or former officer, or current or former employee of any of the 

foregoing, but only to the extent that the COMPANY and any current or former affiliated entity 

possesses the ability to release claims on behalf of such individuals or entities, fully and finally 

releases the United States and its employees from any claims based on the Covered Conduct to 

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the extent, and only to the extent, that such individual or entity is released from claims based on 

that Covered Conduct under Paragraphs 2 through 9 of this Release and such claim is not

excluded under Paragraph 11 of this Release (including, for the avoidance of doubt, claims by 

the entities listed in Paragraph 11(k)), as well as claims under the Equal Access to Justice Act, 28 

U.S.C. § 2412 based on the United States’ investigation and prosecution of the foregoing 

released claims. Nothing herein is intended to release claims for mortgage insurance or 

mortgage guaranty payments or claims for payment for goods and services, such as incentive 

payments under HAMP.

(15)

(a) Unallowable Costs Defined: All costs (as defined in the Federal 

Acquisition Regulations, 48 C.F.R. § 31.205-47) incurred by or on behalf of the COMPANY and 

any current or former affiliated entity (to the extent the COMPANY retains liabilities associated 

with such former affiliated entity), any successor or assign, as well as any current or former 

director, current or former officer, and current or former employee of any of the foregoing, 

individually and collectively, in connection with:

(1) the matters covered by the Consent Judgment;

(2) the United States’ audits and civil investigations of the 

matters covered by the Consent Judgment;

(3) the COMPANY’s and its affiliated entities’ investigation, 

defense, and corrective actions undertaken in response to 

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F-41

the United States’ audit(s) and civil investigation(s) in 

connection with the matters covered by the Consent 

Judgment (including attorney’s fees);

(4) the negotiation and performance of the Consent Judgment; 

and

(5) the payments made to the United States or others pursuant 

to the Consent Judgment,

are unallowable costs for government contracting purposes 

(“Unallowable Costs”).

(b) Future Treatment of Unallowable Costs: Unallowable Costs will 

be separately determined and accounted for by the COMPANY and its affiliated entities, and the 

COMPANY and its affiliated entities shall not charge such Unallowable Costs directly or 

indirectly to any contract with the United States.

(c) Treatment of Unallowable Costs Previously Submitted for 

Payment: Within 90 days of the Effective Date of the Consent Judgment, the COMPANY and its 

affiliated entities shall identify and repay by adjustment to future claims for payment or otherwise 

any Unallowable Costs included in payments previously sought by the COMPANY or any of its 

affiliated entities from the United States. The COMPANY and its affiliated entities agree that the 

United States, at a minimum, shall be entitled to recoup from any overpayment plus applicable 

interest and penalties as a result of the inclusion of such Unallowable Costs on previouslyCase 1:12-cv-00361-RMC Document 14-1 Filed 04/04/12 Page 170 of 223 Case 1:12-cv-00361-RMC Document 1-2 Filed 03/12/12 Page 261 of 314

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submitted requests for payment. The United States reserves its rights to audit, examine, or reexamine the COMPANY’s or affiliated entities’ books and records and to disagree with any 

calculations submitted by the COMPANY or any of its affiliated entities regarding any 

Unallowable Costs included in payments previously sought by the COMPANY or its affiliated 

entities, or the effect of any such Unallowable Costs on the amount of such payments. 

(16) The COMPANY and its affiliated entities agree to cooperate fully and 

truthfully with the United States’ investigation of individuals and entities not released in this 

Release. Upon reasonable notice, the COMPANY shall encourage, and agrees not to impair, the 

reasonable cooperation of its directors, officers and employees, and shall use its reasonable

efforts to make available and encourage the cooperation of former directors, officers, and 

employees for interviews and testimony, consistent with the rights and privileges of such 

individuals. 

(17) This Release is intended to be and shall be for the benefit only of the 

Parties and entities and individuals identified in this Release, and no other party or entity shall 

have any rights or benefits hereunder.

(18) Each party shall bear its own legal and other costs incurred in connection 

with this matter, including the preparation and performance of this Consent Judgment.

(19) Each party and signatory to this Consent Judgment represents that it freely 

and voluntarily enters into the Consent Judgment without any degree of duress or compulsion.

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F-43

(20) This Release is governed by the laws of the United States. The exclusive 

jurisdiction and venue for any dispute arising out of matters covered by this Release is the United 

States District Court for the District of Columbia. For purposes of construing this Release, this 

Release shall be deemed to have been drafted by all the Parties and shall not, therefore, be 

construed against any party for that reason in any subsequent dispute.

(21) The Consent Judgment constitutes the complete agreement between the 

Parties as to the matters addressed herein. The Consent Judgment may not be amended except 

by written consent of the Parties.

(22) The undersigned represent and warrant that they are fully authorized to 

execute the Consent Judgment on behalf of the Parties indicated below.

(23) The Consent Judgment may be executed in counterparts, each of which 

constitutes an original and all of which constitute one and the same Consent Judgment.

(24) This Release is binding on, and inures to the benefit of, the COMPANY’s 

and its affiliated entities’ successors, heirs, and assigns.

(25) The Parties may disclose this Release, and information about this Release, 

to the public at their discretion.

(26) Facsimiles of signatures shall constitute acceptable, binding signatures for 

purposes of this Release.

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(27) Whenever the words “include,” “includes,” or “including” are used in this 

Release, they shall be deemed to be followed by the words “without limitation.”

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EXHIBIT G

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State Release

I. Covered Conduct

For purposes of this Release, the term “Covered Conduct” means residential mortgage 

loan servicing, residential foreclosure services, and residential mortgage loan origination 

services. For purposes of this Release, the term “Bank” means Wells Fargo & Company, as well 

as its current and former parent corporations or other forms of legal entities, direct and indirect 

subsidiaries, brother or sister corporations or other forms of legal entities, divisions or affiliates, 

and the predecessors, successors, and assigns of any of them, as well as the current and former 

directors, officers, and employees of any of the foregoing. For purposes of this Section I only,

the term “Bank” includes agents (including, without limitation, third-party vendors) of the Bank

and the Bank is released from liability for the covered conduct acts of its agents (including, 

without limitation, third-party vendors). This Release does not release the agents (including, 

without limitation, third-party vendors) themselves for any of their conduct. For purposes of this 

Release, the term “residential mortgage loans” means loans secured by one- to four-family 

residential properties, irrespective of usage, whether in the form of a mortgage, deed of trust, or 

other security interest creating a lien upon such property or any other property described therein 

that secures the related mortgage note.

For purposes of this Release, the term “residential mortgage loan servicing” means all 

actions, errors or omissions of the Bank, arising out of or relating to servicing (including 

subservicing and master servicing) of residential mortgage loans from and after the closing of 

such loans, whether for the Bank’s account or for the account of others, including, but not 

limited to, the following: (1) Loan modification and other loss mitigation activities, including,

without limitation, extensions, forbearances, payment plans, short sales and deeds in lieu of 

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G-2

foreclosure, and evaluation, approval, denial, and implementation of the terms and conditions of 

any of the foregoing; (2) Communications with borrowers relating to borrower accounts, 

including, without limitation, account statements and disclosures provided to borrowers; (3) 

Handling and resolution of inquiries, disputes or complaints by or on behalf of borrowers; (4) 

Collection activity related to delinquent borrower accounts; (5) Acceptance, rejection, 

application or posting of payments made by or on behalf of borrowers, including, without 

limitation, assessment and collection of fees or charges, placement of payments in suspense 

accounts and credit reporting; (6) Maintenance, placement or payment (or failure to make 

payment) of any type of insurance or insurance premiums, or claims activity with respect to any 

such insurance; (7) Payment of taxes, homeowner association dues, or other borrower escrow 

obligations, and creation and maintenance of escrow accounts; (8) Use, conduct or supervision of 

vendors, agents and contract employees, whether affiliated or unaffiliated, including, without 

limitation, subservicers and foreclosure and bankruptcy attorneys, in connection with servicing, 

loss mitigation, and foreclosure activities; (9) Adequacy of staffing, training, systems, data 

integrity or security of data that is unrelated to privacy issues, quality control, quality assurance, 

auditing and processes relating to the servicing of residential mortgage loans, foreclosure, 

bankruptcy, and property sale and management services; (10) Securing, inspecting, repairing,

maintaining, or preserving properties before and after foreclosure or acquisition or transfer of 

title; (11) Servicing of residential mortgage loans involved in bankruptcy proceedings; (12) 

Obtaining, executing, notarizing, endorsing, recording, providing, maintaining, registering 

(including in a registry system), and transferring promissory notes, mortgages, or mortgage 

assignments or other similar documents, or transferring interests in such documents among and 

between servicers and owners, and custodial functions or appointment of officers relating to such 

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documents; (13) Decisions on disposition of residential mortgage loans, including, without 

limitation, whether to pursue foreclosure on properties, whether to assert or abandon liens and 

other claims and actions taken in respect thereof, and whether to pursue any particular loan 

modification or other form of loss mitigation; (14) Servicing of residential mortgage loans of 

borrowers who are covered by federal or state protections due to military status; (15) Licensing 

or registration of employees, agents, vendors or contractors, or designation of employees as 

agents of another entity; (16) Quality control, quality assurance, compliance, audit testing, 

oversight, reporting, or certification or registration requirements related to the foregoing; and 

(17) Trustee functions related to the servicing of residential mortgage loans.

For purposes of this Release, the term “residential foreclosure services” means all 

actions, errors or omissions of the Bank arising out of or relating to foreclosures on residential 

mortgage loans, whether for the Bank’s own account or for the account of others, including, but 

not limited to, the following: (1) Evaluation of accounts for modification or foreclosure referral; 

(2) Maintenance, assignment, recovery and preparation of documents that have been filed or 

otherwise used to initiate or pursue foreclosures, and custodial actions related thereto; (3) 

Drafting, review, execution and notarization of documents (including, but not limited to, 

affidavits, notices, certificates, substitutions of trustees, and assignments) prepared or filed in 

connection with foreclosures or sales of acquired properties, or in connection with remediation of 

improperly filed documents; (4) Commencement, advancement and finality of foreclosures, 

including, without limitation, any issues relating to standing, fees, or notices; (5) Acquisition of 

title post-foreclosure or in lieu of foreclosure; (6) Pursuit of pre- and post-foreclosure claims by 

the Bank, including, without limitation, the seeking of deficiency judgments when permitted by 

law, acts or omissions regarding lien releases, and evictions and eviction proceedings; (7) 

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Management, maintenance, and disposition of properties in default or properties owned or 

controlled by the Bank, whether prior to or during the foreclosure process or after foreclosure, 

and executing, notarizing, or recording any documents related to the sale of acquired properties; 

and (8) Trustee functions related to the foreclosure of residential mortgage loans.

For purposes of this Release, the term “residential mortgage loan origination services” 

means all actions, errors or omissions of the Bank arising out of or relating to the origination of, 

or the assistance in the origination of, residential mortgage loans, or the purchasing of residential 

mortgage whole loans, including, but not limited to, the following: (1) Advertising, solicitation, 

disclosure, processing, review, underwriting, closing and funding of borrower residential

mortgage loans or lending services, including, without limitation, the charges, terms, pricing, and 

conditions of such loans or lending services; (2) Approving or denying loan applications; (3) 

Recommendation, offering or provision of loan products, including, without limitation, whether 

such products’ features or terms and conditions were appropriate for a particular borrower; (4)

Valuation of the properties used as collateral for such loans, including, without limitation, use of 

employees, independent and vendor management appraisers, and alternative valuation methods 

such as AVMs and BPOs; (5) Use, referral, conduct or supervision of, or payment of fees or 

other forms of consideration to, vendors, agents or contract employees, whether affiliated or 

unaffiliated, and whether retained by the Bank, borrower or otherwise, including, without 

limitation, closing agents, appraisers, real estate agents, mortgage brokers, and providers of real 

estate settlement services; (6) Drafting and execution of residential mortgage loan documents 

and disclosures and the provision of such disclosures; (7) Obtaining or recording of collateral 

documents relating to the origination of residential mortgage loans, including, without limitation, 

use of trustees or designees on mortgages or deeds of trust; (8) Licensing and registration of 

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employees in connection with origination of residential mortgage loans; (9) Quality control, 

quality assurance, or compliance audit testing, or oversight related to the origination of 

residential mortgage loans; and (10) Communications with borrowers related to the origination 

of residential mortgage loans.

II. Release of Covered Conduct

By their execution of this Consent Judgment, the Attorneys General and state mortgage 

regulators (“Regulators”) that are parties to this Consent Judgment release and forever discharge 

the Bank from the following: any civil or administrative claim, of any kind whatsoever, direct or 

indirect, that an Attorney General or Regulator, respectively, has or may have or assert,

including, without limitation, claims for damages, fines, injunctive relief, remedies, sanctions, or 

penalties of any kind whatsoever based on, arising out of, or resulting from the Covered Conduct 

on or before the Effective Date, or any examination (or penalties arising from such an 

examination) relating to the Covered Conduct on or before the Effective Date, except for claims 

and the other actions set forth in Section IV, below (collectively, the “Released Claims”). 

This Release does not release any claims against any entity other than the Bank as 

defined in Section I above.

III. Covenants by the Bank

1. The Bank waives and shall not assert any defenses the Bank may have to any 

criminal prosecution based on the Covered Conduct that may be based in whole or in part on a 

contention that, under the Double Jeopardy Clause in the Fifth Amendment of the Constitution or 

under the Excessive Fines Clause in the Eighth Amendment of the Constitution, this Release bars 

a remedy sought in such criminal prosecution.

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2. The Bank agrees to cooperate with an Attorney General’s criminal investigation 

of individuals and entities not released in this Release. For purposes of this covenant, 

cooperation shall not include any requirement that the Bank waive the attorney-client privilege 

or any other applicable privileges or protection, included but not limited to the attorney work 

product doctrine. Upon reasonable notice, the Bank agrees not to impair the reasonable 

cooperation of its directors, officers and employees, and shall use its reasonable efforts to make 

available and encourage the cooperation of former directors, officers, and employees for 

interviews and testimony, consistent with the rights and privileges of such individuals.

IV. Claims and Other Actions Exempted from Release

Notwithstanding the foregoing and any other term of this Consent Judgment, the 

following claims are hereby not released and are specifically reserved:

1. Securities and securitization claims based on the offer, sale, or purchase of 

securities, or other conduct in connection with investors or purchasers in or of securities,

regardless of the factual basis of the claim, including such claims of the state or state entities as 

an owner, purchaser, or holder of whole loans, securities, derivatives or similar investments, 

including, without limitation, mortgage backed securities, collateralized debt obligations or 

structured investment vehicles, and including, but not limited to, such claims based on the 

following: 

(a) the creation, formation, solicitation, marketing, assignment, transfer, offer, 

sale or substitution of securities, derivatives, or other similar investments, including, 

without limitation, mortgage backed securities, collateralized debt obligations, 

collateralized loan obligations, or structured investment vehicles; 

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(b) representations, warranties, certifications, or claims made regarding such 

securities or investments, such as representations, warranties, certifications or claims 

regarding origination, funding, and underwriting activities, and including the eligibility, 

characteristics, or quality of the mortgages or the mortgagors; 

(c) the transfer, sale, conveyance, or assignment of mortgage loans to, and the 

purchase and acquisition of such mortgage loans by, the entity creating, forming and 

issuing the securities, derivatives or other similar investments relating to such mortgage 

loans;

(d) all servicing-, foreclosure-, and origination-related conduct, but solely to the 

extent that such claims are based on the offer, sale, or purchase of securities, or other 

conduct in connection with investors or purchasers in or of securities; and

(e) all Covered Conduct, but solely to the extent that such claims are based on the 

offer, sale, or purchase of securities, or other conduct in connection with investors or 

purchasers in or of securities.

For avoidance of doubt, securities and securitization claims based on the offer, sale, or purchase 

of securities, or other conduct in connection with investors or purchasers in or of securities, that

are based on any source of law, including, but not limited to, false claims acts or equivalent laws, 

securities laws, and common law breach of fiduciary duty, are not released.

2. Claims against a trustee or custodian or an agent thereof based on or arising out of 

the conduct of the trustee, custodian or such agent related to the pooling of residential mortgage 

loans in trusts, mortgage backed securities, collateralized debt obligations, collateralized loan 

obligations, or structured investment vehicles, including, but not limited to, the performance of 

trustee or custodial functions in such conduct.

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3. Liability based on the Bank’s obligations created by this Consent Judgment.

4. Obligations relating to assurances of voluntary compliance entered into between 

various states and Wells Fargo, N.A. in 2010, 2011, and 2012 relating to pay option ARMs.

5. Claims raised by the Illinois Attorney General in Illinois v. Wells Fargo & Co., et 

al., 2009-CH-26434.

6. Claims raised in State of Connecticut v. Acordia, Inc., X10-UNYCV0704020455-S (currently pending before the Connecticut Supreme Court). 

7. Claims raised in State ex rel. Darrell V. McGraw, Jr. v. Acordia of West Virginia, 

Inc., et al. (civil action no. 05-C-115W - circuit court of Hancock County).

8. Claims raised in State of New York v. JPMorgan Chase Bank, et al., Index No. 

2768/2012 (N.Y. Sup. Ct.), and any similar claims – relating to the same types of acts, practices, 

or conduct set forth in that lawsuit – that may be asserted in the future by the Office of the New 

York State Attorney General against Citigroup, Inc., Citibank, N.A., CitiMortgage, Inc., Ally 

Financial, Inc., GMAC Mortgage LLC, Residential Capital, LLC, or their parents, subsidiaries, 

or affiliates.

9. Claims and remedies raised in State of Delaware v. MERSCORP, Inc. et al. (CANO-6987-CS), currently pending in the Court of Chancery for the State of Delaware, and any 

similar claims – relating to the same types of acts, practices, or conduct set forth in that lawsuit 

in connection with mortgages registered in the MERS system and loans secured by such 

mortgages – that may be asserted in the future by the Delaware Department of Justice against 

Bank of America, N.A., BAC Home Loans Servicing, LP, JPMorgan Chase Bank, N.A., Chase 

Home Finance LLC, EMC Mortgage Corporation, Wells Fargo Bank, N.A., Citigroup, Inc., 

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Citibank, N.A., CitiMortgage, Inc., Ally Financial, Inc., GMAC Mortgage LLC, Residential 

Capital, LLC, or their parents, subsidiaries, or affiliates.

10. Claims raised in Commonwealth of Massachusetts v. Bank of America, N.A., et al.

(Civ. A. No. 11-4363), currently pending in the Superior Court of Massachusetts, Suffolk 

County.

11. Claims of any kind that the State of Utah has or may have against any person or 

entity not released under this Consent Judgment, or any right that State of Utah has or may have 

to take law enforcement action of any kind against any person or entity not released under this

Consent Judgment, including any person or entity who is or may be a co-obligor with a person or 

entity that is released under this Consent Judgment, all of which claims, rights and actions are 

expressly reserved by the State of Utah.

12. Claims against Mortgage Electronic Registration Systems, Inc. or MERSCORP, 

INC.

13. Claims arising out of alleged violations of fair lending laws that relate to 

discriminatory conduct in lending. 

14. Claims of state, county and local pension or other governmental funds as 

investors (whether those claims would be brought directly by those pension or other 

governmental funds or by the Office of the Attorney General as attorneys representing the 

pension or other governmental funds). 

15. Tax claims, including, but not limited to, claims relating to real estate transfer 

taxes.

16. Claims of county and local governments and claims of state regulatory agencies 

having specific regulatory jurisdiction that is separate and independent from the regulatory and 

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enforcement jurisdiction of the Attorney General, but not including claims of Regulators that are 

released herein.

17. Criminal enforcement of state criminal laws.

18. Claims of county recorders, city recorders, town recorders or other local 

government officers or agencies (or, for Hawaii only, where a statewide recording system is 

applicable and operated by the state, claims by Hawaii; and for Maryland, where the recording

system is the joint responsibility of the counties or Baltimore City and the state, claims of the 

counties or Baltimore City and the state), for fees relating to the recordation or registration 

process of mortgages or deeds of trust, including assignments, transfers, and conveyances, 

regardless of whether those claims would be brought directly by such local government officers 

or agencies or through the Office of the Attorney General as attorneys representing such local 

government officers or agencies.

19. Claims and defenses asserted by third parties, including individual mortgage loan 

borrowers on an individual or class basis.

20. Claims seeking injunctive or declaratory relief to clear a cloud on title where the 

Covered Conduct has resulted in a cloud on title to real property under state law; provided, 

however, that neither the Attorneys General nor Regulators shall otherwise take actions seeking 

to invalidate past mortgage assignments or foreclosures in connection with loans serviced and/or 

owned by the Bank. For the avoidance of doubt, nothing in this paragraph 20 releases, waives or 

bars any legal or factual argument related to the validity of past mortgage assignments or 

foreclosures that could be made in support of claims not released herein, including, without 

limitation, all claims preserved under paragraphs 1 through 23 of Section IV of this Release.

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21. Disciplinary proceedings brought by a Regulator against individual employees 

with respect to mortgage loan origination conduct for misconduct or violations under state law.

22. Authority to resolve consumer complaints brought to the attention of the Bank for 

resolution outside of the monitoring process, as described in Section H of the Enforcement 

Terms (Exhibit E).

23. Claims against Bank for reimbursement to mortgage borrowers:

(a) That represent: (i) a fee imposed upon and collected from a mortgage 

borrower by Bank and retained by Bank which fee is later determined to have been 

specifically prohibited by applicable state law (an “Unauthorized Fee”), provided that

such determination of impermissibility is not predicated, directly or indirectly, on a 

finding of a violation of any federal law, rule, regulation, agency directive or similar 

requirement; and (ii) an actual overpayment by a borrower resulting from a clear and 

demonstrable error in calculation of amounts due from said borrower; and 

(b) That are subject to the following: (i) are identified in the course of a

mandatory state regulatory compliance examination commenced after the Effective Date 

by the Iowa Division of Banking, Nevada Division of Mortgage Lending, New 

Hampshire Banking Department, Ohio Division of Financial Institutions, or Rhode Island 

Department of Business Regulation, which examination period is specifically limited to

Bank’s Covered Conduct beginning on January 1, 2011 and ending on January 1, 2012; 

or (ii) are part of a state regulatory compliance examination that was open or in process 

as of the Effective Date; and

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(c) That are not duplicative of any prior voluntary or involuntary payment to the 

affected loan borrower by Bank, whether directly or indirectly, from any State Payment 

or other source.

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GARCIA 04458
EXHIBIT H

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GARCIA 04459
USDOJ Servicemembers Civil Relief Act Settlement Provisions: 

Wells Fargo Bank, N.A. and Wells Fargo & Company 

In exchange for a full release of the United States’1

 potential civil claims under the 

Servicemembers Civil Relief Act (“SCRA”), 50 U.S.C. app. § 501, et seq., arising prior to the 

date of this agreement against Servicer2

 with respect to the servicing of residential mortgages, 

under the provisions of the SCRA related to (a) mortgage foreclosure and (b) the prohibition 

against charging more than 6% interest on SCRA-covered mortgaged debt after a valid request 

by a servicemember to lower the interest rate and receipt of orders, Servicer agrees to the 

provisions set forth below. 

I. Servicer shall comply with all the “Protections for Military Personnel” provisions in the 

Settlement Agreement (“Article V”). In addition, Servicer shall undertake additional 

remedial action and agree to the policy changes set forth below. 

II. Compensation for Servicemembers and Co-Borrowers 

a. Violations of Sections 533 and 521 of the SCRA related to completed 

foreclosures on active duty servicemembers: Servicer will engage an independent 

consultant whose duties shall include a review of all completed foreclosures from 

January 1, 2006 to the present to evaluate whether the completed foreclosures 

were in compliance with Sections 533 and 521 of the SCRA. Servicer shall 



1

 The following claims are specifically reserved and not released: Any action that may be taken by the appropriate 

Federal Banking Agency (FBA), as defined in 12 U.S.C. § 1813(q), against Servicer, any of its affiliated entities, 

and/or any institution-affiliated party of Servicer, as defined in 12 U.S.C. § 1813(u), pursuant to 12 U.S.C. § 1818, 

and any action by the FBA to enforce the Consent Order issued against Servicer by the FBA on April 13, 2011. 2 For purposes of the agreement in this exhibit, “Servicer” shall mean Wells Fargo Bank, N.A. and Wells Fargo & 

Company, and their successors and assignees in the event of a sale of all or substantially all of the mortgage 

servicing related assets of (1) Wells Fargo Bank, N.A. or Wells Fargo & Company, or (2) any of Wells Fargo Bank, 

N.A. or Wells Fargo & Company’s division(s) or major business unit(s) that are engaged in servicing residential 

mortgages. 

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GARCIA 04460
propose an independent consultant and submit the independent consultant’s 

proposed methodology to DOJ for approval within 30 days after the entry of this 

agreement. The independent consultant shall begin its review within 30 days after 

receiving the above-referenced approvals by DOJ. The independent consultant 

shall submit the results of its review to DOJ within 150 days after it receives the 

data necessary for its analysis from the Department of Defense’s Defense 

Manpower Data Center (“DMDC”) providing relevant periods of military service 

of borrowers for completed foreclosures from January 1, 2006 to present. Based 

on the information gathered by the independent consultant, information submitted 

by Servicer, and DOJ’s independent investigation, DOJ shall make the 

determination reasonably based on the information it has received and its 

investigative conclusions whether or not a completed foreclosure was in 

compliance with the SCRA. In the event Servicer disagrees with the DOJ’s 

determination, Servicer shall be afforded 30 days to produce evidence of 

compliance, which DOJ shall consider in good faith. Where DOJ determines that 

a foreclosure was not in compliance with the SCRA, Servicer shall compensate 

the borrowers (i.e., any individual(s) who signed the note with respect to a 

foreclosed property) by providing:

(1) an amount of $116,785.00 to the servicemember-borrower or an amount 

consistent with what was provided under the OCC Consent Order Independent 

Review Process for similar violations of Sections 533 or 521 of the SCRA, 

whichever is higher;

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(2) any lost equity in the foreclosed property, as calculated by: subtracting:

(a) any outstanding principal, interest, and other amounts owing by the 

borrowers (excluding any fees associated with foreclosure) plus any 

junior liens at the time of foreclosure and any disbursements made to 

the servicemember or a third party other than a junior lien holder from 

the proceeds of the foreclosure sale (exclusive of any fees associated 

with the foreclosure) from 

(b) Either: 

i. a contemporaneous appraisal reflecting the value of the 

home at the time of foreclosure; 

ii. a BPO or other desktop determination of property valuation 

that results in property valuations reasonably consistent3

with those contained in contemporaneous appraisals; or 

iii. a retroactive appraisal reflecting the value of the home at 

the time of foreclosure; and 

(3) interest accrued on this lost equity, calculated from the date of the foreclosure 

sale until the date payment is issued, at the rate set forth in 28 U.S.C. § 1961.4

While the amount described in subsection (1) shall be paid entirely to the 

servicemember-borrower on the note securing the mortgage, the amounts 



3

 Before Servicer may rely on a BPO or desktop determination for purposes of this subsection, Servicer must first 

obtain DOJ approval that the methodology for the BPO or desktop determination results in property valuations 

reasonably consistent with a contemporaneous appraisal. DOJ shall not unreasonably withhold such approval. 4

 The independent consultant shall calculate the lost equity and interest described herein as part of its review.

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described in subsections (2) and (3) shall be distributed among all owners 

(including non-servicemember owners) on the deed.5 In cases where Servicer has 

already taken remedial actions with respect to a foreclosure which DOJ 

determines did not comply with Sections 533 or 521 of the SCRA, DOJ shall 

consider such remedial actions and adjust the compensation to be awarded to the 

subject borrower or mortgagor.6

 DOJ will submit lists or electronic links to, the 

Servicer identifying servicemembers or co-borrowers to be compensated, and 

Servicer must notify each identified servicemember or co-borrower (using best 

efforts to locate each person) by letter (using Exhibit 1 or a modified version 

mutually agreeable to Servicer and DOJ) within 45 days of receiving this list. 

Any letters returned with forwarding addresses must be promptly mailed to the 

forwarding address. Servicer shall issue and mail compensation checks no later 

than 21 days after receipt of a signed release from the servicemember or coborrower aggrieved person. Every 6 months for a period of two years following 

entry of this agreement, Servicer shall provide the DOJ with an accounting of all 

releases received, checks issued (including copies of issued checks), credit entries 



5

 If information is available regarding percentages of ownership interest in the subject property, the amounts 

described in subsections (2) and (3) will be distributed in amounts proportionate to the ownership interests. 

Otherwise, amounts described in subsections (2) and (3) will be distributed equally among owners. 6

 In determining the amount of compensation due to any servicemember or co-borrower pursuant to Subsection II.a, 

DOJ will credit any monetary compensation or other remediation efforts, including returning the home to the 

borrower, already provided to any servicemember or co-borrower for alleged compliance issues pursuant to Sections 

533 or 521 of the SCRA and arising from the same mortgage. In the event that a servicemember located through 

the OCC Independent Consultant review process elects to receive the return of his or her home in lieu of a flat fee 

damages payment pursuant to the OCC Consent Order remediation plan (which payment shall not be less than the 

amount provided in Section II.a.(1))for violations of Sections 533 or 521 of the SCRA and arising from the same 

mortgage, the servicemember shall be compensated pursuant to the terms of the OCC Consent Order remediation 

plan rather than Section II.a of this agreement.

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GARCIA 04463
repaired, and notifications without responses or that were returned as 

undeliverable.

b. Violations of Section 527 of the SCRA related to failing to limit interest rates to 

6% on SCRA-covered mortgage debt: Servicer will engage an independent 

consultant whose duties shall include a review of either all or a sample of 

mortgage loans where a borrower on the note securing the mortgage submitted a 

request either orally or in writing for protection under Section 527 of the SCRA 

from January 1, 2008 – present to evaluate whether the Servicer complied with 

Section 527 of the SCRA. The DOJ shall determine whether a sample or a 

comprehensive review, or some combination thereof, would be more appropriate 

to locate potential violations by the Servicer. The consultant’s methodology must 

be submitted to DOJ for approval within 60 days after entry of this agreement. 

DOJ’s approval of the methodology will be based on, among other things, DOJ’s 

evaluation of the Servicer’s SCRA policies in and around the time period in 

question, Servicer’s search capabilities for determining which individuals 

requested, either orally or in writing, interest rate protections based on their 

military status, the servicing platform, and the number of individuals who 

requested such protection. The consultant shall submit the results of its review 

within 180 days after DOJ’s approval of the methodology. Based on the 

information gathered by the consultant, information submitted by the Servicer, 

and DOJ’s independent investigation, DOJ shall make the determination, 

reasonably based on the information it has received and its investigative 

conclusions, whether or not potential violations of Section 527 occurred. In the 

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event Servicer disagrees with the DOJ’s determination, Servicer shall be afforded 

30 days to produce evidence of compliance, which DOJ shall consider in good 

faith. Where DOJ determines that a mortgage loan was not serviced in 

compliance with Section 527, Servicer shall: (1) refund (with interest, as 

calculated pursuant to 28 U.S.C. § 1961) all interest and fees charged above 6%; 

and (2) provide an additional payment of $500 or triple the amount of the refund 

referenced in subsection (1), whichever amount is larger.7

 The compensation 

described in subsection (1) shall be distributed equally among all borrowers 

(including non-servicemember borrowers) on the note secured by the mortgage. 

The compensation described in subsection (2) shall be paid entirely to the 

servicemember. In cases where Servicer has already taken remedial actions with 

respect to a mortgage which DOJ determines did not comply with Section 527 of 

the SCRA, DOJ shall consider such remedial actions and adjust the compensation 

to be awarded to the subject servicemember, borrower, or mortgagor.8

 DOJ will 

submit lists or electronic links to the Servicer of identified servicemembers or coborrowers to be compensated, and Servicer must notify each identified 

servicemember or co-borrower (using best efforts to locate each person) by letter 

(using Exhibit 2 or a modified version mutually agreeable to Servicer and DOJ) 

within 60 days of receiving this list of servicemembers or co-borrowers to be 

compensated. Any letters returned with forwarding addresses must be promptly 



7

 The independent consultant shall calculate the amounts described herein as part of its review. 8

 In determining whether any compensation is due to any servicemember or co-borrower pursuant to Subsection 

II.b, and, if so, ,the amount DOJ will consider the timing of any remedial actions and will credit any monetary 

compensation already provided to any servicemember or co-borrower for alleged compliance issues pursuant to 

Section 527 of the SCRA and arising from the same mortgage, and/or provided under the OCC Consent Order 

Independent Consultant review process for violations of Section 527 of the SCRA and arising from the same 

mortgage.

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GARCIA 04465
mailed to the forwarding address. Servicer shall issue and mail compensation 

checks no later than 21 days of receipt of a signed release from the 

servicemember or co-borrower aggrieved person. Every 6 months for a period of 

two years following entry of this agreement, Servicer shall provide the DOJ with 

an accounting of all releases received, checks issued (including copies of issued 

checks), credit entries repaired, and notifications without responses or that were 

returned as undeliverable. 

c. Concurrent with providing financial compensation to the servicememberborrower, Servicer must request that all three major credit bureaus remove 

negative entries for the servicemember(s) and any co-borrower(s) attributable 

specifically to the wrongful foreclosure or interest overcharges and Servicer shall 

not pursue, and must indemnify the servicemember and his or her co-borrower(s) 

against any third-party pursuing, any deficiency that was remaining on the 

servicemember’s SCRA-protected mortgage or junior lien after a foreclosure was 

completed in violation of the SCRA. 

d. Servicer shall have 10 days after DOJ’s final determination that a foreclosure was 

not in compliance with the SCRA or a mortgage loan was not serviced in 

compliance with Section 527, to seek judicial review on the ground that DOJ 

made a clearly erroneous factual determination. 

III. SCRA Compliance Policies 

a. Servicer shall submit SCRA mortgage foreclosure-related policies to DOJ for 

review and approval. If the Servicer decides to make a material modification to 

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these policies, Servicer will provide the modified policies for review and 

approval. DOJ will advise Servicer of the results of DOJ’s review within 60 days 

of receipt of a complete submission of all SCRA mortgage foreclosure-related 

policies and any subsequent material modifications. In addition to the areas 

covered under the “Protection of Military Personnel” provisions in the attached 

document, these policies must address: 

i. Prior to referring a loan to foreclosure, the Servicer shall review any orders 

it has received from borrowers9

 and check borrowers’ names and social 

security numbers against the DMDC website as provided in the 

“Protections of Military Personnel” provisions in the Settlement 

Agreement. 

ii. If Servicer pursues a foreclosure action in court and the borrower fails to 

answer the action, Servicer and/or its agent will file a military affidavit 

with the court as required by Section 521(b)(1)(A). After the borrower 

fails to answer and prior to seeking entry of default, Servicer and/or its 

agent will query the DMDC and review information in its possession or 

control for orders to determine if the borrower is on active duty. If 

Servicer and/or its agent learns that the borrower is on active duty or was 

on active duty at the time of his or her failure to answer Servicer and/or its 

agent will file an affidavit stating that “the defendant is in military service” 

or “was in military service at the time of his or her failure to answer” prior 



9

 For the purposes of locating orders to be reviewed pursuant to Sections III.a.i and III.a.ii of this agreement, it shall 

be sufficient for the Servicer to flag or code accounts upon receipt of orders and rely on that system. 

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to seeking default judgment and attaching the most recent certificate of 

service from the DMDC or a copy of the military orders. 

iii. If Servicer initiates and pursues a waiver under a written agreement as 

provided in Section 517 of the SCRA, Servicer must initiate the waiver 

process with the servicemember at least 30 days in advance of any 

anticipated foreclosure sale date by sending a notice and a copy of the 

proposed waiver to the servicemember. To the extent Servicer exercises 

this right, Servicer shall utilize a notice and proposed waiver in the form 

attached as Exhibit 3. This provision may be modified based on changes in 

servicing requirements from government-sponsored entities or the 

Department of Housing and Urban Development. 

b. Servicer shall submit SCRA mortgage loan interest rate-related policies to DOJ 

for review and approval. If the Servicer decides to make a material modification 

to these policies, Servicer will provide the modified policies for review and 

approval. DOJ will advise Servicer of the results of DOJ’s review within 60 days 

of receipt of a complete submission of all SCRA mortgage loan interest raterelated policies and any subsequent material modifications. In addition to the 

areas covered under Article V of the Settlement Agreement, these policies must 

address:

i. Servicer shall accept servicemembers' requests for reduced mortgage 

interest rates pursuant to the SCRA via electronic mail, facsimile, U.S. 

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Mail, Federal Express or other overnight/express delivery to facsimile 

numbers and addresses designated by the Servicer. Within six months after 

entry of this agreement, Servicer shall also accept servicemembers’ 

requests for reduced mortgage interest rates pursuant to the SCRA via inperson delivery at the Servicer’s full-service branch locations, should the 

Servicer maintain branch locations.

ii. When a servicemember requests interest rate relief under the SCRA,

Servicer shall accept orders as defined in the Settlement Agreement or any 

other document that the DOD shall deem sufficient as a substitute for 

official orders.

iii. Servicer shall seek only orders identifying the beginning date of the 

applicable period of military service from the requesting servicemember 

and may not condition providing SCRA benefits on the servicemember 

submitting orders that include an end date. 

iv. Before concluding that the SCRA permits raising the interest rate on the 

servicemember's loan higher than six percent, the Servicer shall access the 

DMDC website to determine the dates, where available, of active duty 

military service of those servicemembers who request reduced interest rates 

pursuant to the SCRA. If DMDC indicates that the individual is still on 

active duty, the Servicer must continue to limit the charges pursuant to 

Section 527 of the SCRA. 

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v. For those servicemembers who request a reduced interest rate pursuant to 

the SCRA, but are determined not to be eligible for the reduced rate, 

Servicer shall notify the servicemembers in writing of the reasons for the 

denial and that they may provide additional documentation or information 

to establish eligibility for the reduced interest rate. 

c. In the event that DOJ requires a change or modification pursuant to this 

agreement that is in conflict with a policy required by the appropriate Federal 

Banking Agency (FBA), as defined in 12 U.S.C. § 1813(q), under the Consent 

Order issued against the Servicer by the FBA on April 13, 2011, and the FBA will 

not consent to the change, DOJ shall meet and confer with the FBA to resolve the 

conflict. Nothing in this agreement prevents DOJ from requiring Servicer to 

adopt policies that provide additional protections beyond the policies required by 

the FBA. 

IV. Training and Monitoring Program 

a. Within 45 days after entry of this agreement, Servicer shall provide its proposed 

training on the SCRA and this settlement to DOJ for approval. After receiving 

DOJ’s approval, Servicer shall provide and require training on the SCRA and this 

settlement for employees (including management officials): (1) providing 

customer service to servicemembers, (2) involved in mortgage servicing, 

including adjusting interest rates for mortgage loans, or (3) with significant 

involvement in the foreclosure process, within 60 days of DOJ’s approval (if 

already employed in such a position), or within 30 days of his or her hiring, 

H - 12

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GARCIA 04470
promotion, or transfer. Servicer shall also obtain confirmation from third-party 

vendors, law firms, and/or trustee companies involved in conducting foreclosures 

that their employees who are involved in the foreclosure process have been 

trained on their obligations to comply with this settlement and the SCRA. 

b. Servicer shall implement a monitoring program approved by DOJ designed to 

ensure compliance with this settlement and the SCRA. At a minimum, 

monitoring will include a quarterly report to be submitted to DOJ10 within 60 days 

after the end of each quarter containing an analysis of a sample of foreclosures 

and a sample of mortgages where a borrower or mortgagor submitted orders 

seeking protection under Section 527 of the SCRA to determine compliance with 

the SCRA and this settlement. If Servicer learns that despite the policies required 

by Section III a violation of Section 521, 527 or 533 has occurred, Servicer will 

take corrective action as set forth in Section II of this agreement. 

V. Term of Agreement 

This agreement shall retain full force and effect for three and one-half years from 

the date it is entered (the “Term”). Servicer’s obligation pursuant to Section III to 

submit quarterly reports and DOJ’s review of the same shall continue for the six 

months following the Term, after which time Servicer shall have no further 

obligations under this agreement. 



10 All materials required by this Order to be sent to the Department of Justice shall be sent by commercial overnight 

delivery service addressed as follows: Chief, Housing and Civil Enforcement Section, Civil Rights Division, U.S. 

Department of Justice, 1800 G Street NW, Washington, D.C. 20006, Attn: DJ 216-16-4.. 

H - 13

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GARCIA 04471
EXHIBIT H - 1

H - 14

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GARCIA 04472
[SCRA NOTIFICATION LETTER FOR SECTION 533 SERVICEMEMBER] 

Name of Servicemember 

123 Main Street 

City, State Zip code 

Re: Loan Number [Insert] 

Dear [Servicemember]: 

We write to inform you that ________________ (“the Bank”), entered into a settlement on 

_______________, with the United States Department of Justice regarding alleged violations of 

the Servicemembers Civil Relief Act (“SCRA”). This settlement resolves the Department of 

Justice’s allegations that the Bank foreclosed on properties without approval by a court when the 

SCRA required that the foreclosures be approved by a court.

In connection with this settlement, the Department of Justice identified you as a person 

who may be eligible for financial compensation with respect to your loan [add loan number(s)].

Please read and carefully review the declaration attached to this letter. If it is accurate, please 

sign and return to us the release and declaration attached to this letter in the enclosed postage 

paid envelope. After we receive these documents, we will send you a check in the amount of 

[insert amount]. This amount includes any equity remaining in your home at the time of the 

foreclosure and monetary damages. In addition, the Bank will request that all major credit 

bureaus remove any negative entries on your credit report resulting from the foreclosure. This 

release and declaration must be returned by __________.

You should be aware that the money you are eligible to receive may have consequences 

with respect to your federal, state, or local tax liability, as well as eligibility for any public 

assistance benefits you may receive. Neither the Bank nor the Department of Justice can advise 

you on tax liability or any effect on public assistance benefits. You may wish to consult with a 

qualified individual or organization about any possible tax or other consequences resulting from 

your receipt of this payment. 

If you have any questions concerning the declaration, release or settlement or if anyone 

seeks to collect a debt arising from your mortgage, please contact [Insert Independent Consultant 

Name] at [Insert Contact Information including a phone number]. 

We deeply appreciate your service to our country. We are committed to serving the 

financial needs of our customers who serve in the military, and we regret any error that may have 

occurred on your account. 

H - 15

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GARCIA 04473
 Sincerely, 

[Name] 

[Title] 

Enclosures: Release and Declaration 

H - 16

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GARCIA 04474
RELEASE

 In consideration for the parties’ agreement to the terms of the Consent Order entered 

in_________________________________ , and the Defendant’s payment to me of 

$______________, pursuant to the Consent Order, I hereby release and forever discharge all 

claims, arising prior to the entrance of this Order, related to the facts at issue in the litigation 

referenced above and related to the alleged violations of Section 533 of the Servicemembers 

Civil Relief Act, that I may have against the Defendant, all related entities, parents, predecessors, 

successors, subsidiaries, and affiliates, and all of its past and present directors, officers, agents, 

managers, supervisors, shareholders and employees and their heirs, executors, administrators, 

successors or assigns. 

 Executed this day of , 20 .

 ________________________________________ 

 Signature 

 

 ________________________________________ 

 Print Name 

 ________________________________________ 

 Address 

H - 17

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GARCIA 04475
[SCRA NOTIFICATION LETTER FOR SECTION 533 CO-BORROWER] 

Name of Co-borrower 

123 Main Street 

City, State Zip code 

Re: Loan Number [Insert] 

Dear [Co-borrower]: 

We write to inform you that ________________ (“the Bank”), entered into a settlement on 

_______________, with the Department of Justice regarding alleged violations of the 

Servicemembers Civil Relief Act (“SCRA”). This settlement resolves the Department of Justice’s 

allegations that the Bank foreclosed on properties without approval by a court when the SCRA 

required that the foreclosures be approved by a court.

In connection with this settlement, the Department of Justice identified you as a person 

who may be eligible for financial compensation with respect to your loan [add loan number(s)].

If you sign and return to us the release attached to this letter in the enclosed postage paid 

envelope and your co-borrower signs and returns the declaration and release that will be sent 

separately to your co-borrower, we will send you a check in the amount of [insert amount]. This 

amount represents your portion of any equity remaining in your home at the time of the 

foreclosure. In addition, the Bank will request that all major credit bureaus remove any negative 

entries on your credit report attributable to the foreclosure. 

 To receive this payment, you must return the attached release within six months of the 

date of receipt of this letter. The release, if signed, releases any claim to lost equity that you may 

have under Section 533 of the SCRA; however, it does not release any other claim you may have 

under the SCRA, including Section 533, or other laws.

You should be aware that the money you are eligible to receive may have consequences 

with respect to your federal, state, or local tax liability, as well as eligibility for any public 

assistance benefits you may receive. Neither the Bank nor the Department of Justice can advise 

you on tax liability or any effect on public assistance benefits. You may wish to consult with a 

qualified individual or organization about any possible tax or other consequences resulting from 

your receipt of this payment. 

If you have any questions concerning the release or settlement or if anyone seeks to 

collect a debt arising from your mortgage, please contact [Insert Independent Consultant Name] 

at [Insert Contact Information including a phone number]. 

H - 18

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GARCIA 04476
We are committed to serving the financial needs of our customers who serve in the 

military, and we regret any error that may have occurred on your account. 

 Sincerely, 

[Name] 

[Title] 

Enclosure: Release

H - 19

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GARCIA 04477
RELEASE

 In consideration for the parties’ agreement to the terms of the Consent Order entered 

in_________________________________ , and the Defendant’s payment to me of 

$______________, pursuant to the Consent Order, I hereby release and forever discharge any 

claim under Section 533 of the Servicemembers Civil Relief Act for lost equity in the property 

related to the litigation referenced above and arising prior to the entrance of this Order, that I 

may have against the Defendant, all related entities, parents, predecessors, successors, 

subsidiaries, and affiliates, and all of its past and present directors, officers, agents, managers, 

supervisors, shareholders and employees and their heirs, executors, administrators, successors or 

assigns. 

 Executed this day of , 20 .

 ________________________________________ 

 Signature 

 

 ________________________________________ 

 Print Name 

 ________________________________________ 

 Address 

H - 20

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GARCIA 04478
[SCRA NOTIFICATION LETTER FOR SECTION 521 SERVICEMEMBER] 

Name of Servicemember 

123 Main Street 

City, State Zip code 

Re: Loan Number [Insert] 

Dear [Servicemember]: 

We write to inform you that ________________ (“the Bank”), entered into a settlement on 

_______________, with the United States Department of Justice regarding alleged violations of 

the Servicemembers Civil Relief Act (“SCRA”). This settlement resolves the Department of 

Justice’s allegations that the Bank foreclosed on servicemembers through default court 

proceedings without filing accurate affidavits notifying the court of the servicemembers’ military 

statuses.

In connection with this settlement, the Department of Justice identified you as a person 

who may be eligible for financial compensation with respect to your loan [add loan number(s)].

Please read and carefully review the declaration attached to this letter. If it is accurate, please 

sign and return to us the release and declaration attached to this letter in the enclosed postage 

paid envelope. After we receive these documents, we will send you a check in the amount of 

[insert amount]. This amount includes your portion of any equity remaining in your home at the 

time of the foreclosure and monetary damages. In addition, the Bank will request that all major 

credit bureaus remove any negative entries on your credit report resulting from the foreclosure. 

This release and declaration must be returned by __________. 

You should be aware that the money you are eligible to receive may have consequences 

with respect to your federal, state, or local tax liability, as well as eligibility for any public 

assistance benefits you may receive. Neither the Bank nor the Department of Justice can advise 

you on tax liability or any effect on public assistance benefits. You may wish to consult with a 

qualified individual or organization about any possible tax or other consequences resulting from 

your receipt of this payment. 

If you have any questions concerning the declaration, release or settlement or if anyone 

seeks to collect a debt arising from your mortgage, please contact [Insert Independent Consultant 

Name] at [Insert Contact Information including a phone number]. 

H - 21

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GARCIA 04479
We deeply appreciate your service to our country. We are committed to serving the 

financial needs of our customers who serve in the military, and we regret any error that may have 

occurred on your account. 

 Sincerely, 

[Name] 

[Title] 

Enclosures: Release and Declaration 

H - 22

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GARCIA 04480
RELEASE

 In consideration for the parties’ agreement to the terms of the Consent Order entered 

in_________________________________ , and the Defendant’s payment to me of 

$______________, pursuant to the Consent Order, I hereby release and forever discharge all 

claims, arising prior to the entrance of this Order, related to the facts at issue in the litigation 

referenced above and related to the alleged violations of Section 521 of the Servicemembers 

Civil Relief Act, that I may have against the Defendant, all related entities, parents, predecessors, 

successors, subsidiaries, and affiliates, and all of its past and present directors, officers, agents, 

managers, supervisors, shareholders and employees and their heirs, executors, administrators, 

successors or assigns. 

 Executed this day of , 20 .

 ________________________________________ 

 Signature 

 

 ________________________________________ 

 Print Name 

 ________________________________________ 

 Address 

H - 23

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GARCIA 04481
[SCRA NOTIFICATION LETTER FOR SECTION 521 CO-BORROWER] 

Name of Co-borrower 

123 Main Street 

City, State Zip code 

Re: Loan Number [Insert] 

Dear [Co-borrower]: 

We write to inform you that ________________ (“the Bank”), entered into a settlement on 

_______________, with the United States Department of Justice regarding alleged violations of 

the Servicemembers Civil Relief Act (“SCRA”). This settlement resolves the Department of 

Justice’s allegations that the Bank foreclosed on servicemembers through default court 

proceedings without filing accurate affidavits notifying the court of the servicemembers’ military 

statuses.

In connection with this settlement, the Department of Justice identified you as a person 

who may be eligible for financial compensation with respect to your loan [add loan number(s)].

If you sign and return to us the release attached to this letter in the enclosed postage paid 

envelope and your co-borrower signs and returns the declaration and release that will be sent 

separately to your co-borrower, we will send you a check in the amount of [insert amount]. This 

amount represents your portion of any equity remaining in your home at the time of the 

foreclosure. In addition, the Bank will request that all major credit bureaus remove any negative 

entries on your credit report attributable to the foreclosure. 

 To receive this payment, you must return the attached release within six months of the 

date of receipt of this letter. The release, if signed, releases any claim to lost equity that you may 

have under Section 521 of the SCRA; however, it does not release any other claim you may have 

under the SCRA, including Section 521, or other laws.

You should be aware that the money you are eligible to receive may have consequences 

with respect to your federal, state, or local tax liability, as well as eligibility for any public 

assistance benefits you may receive. Neither the Bank nor the Department of Justice can advise 

you on tax liability or any effect on public assistance benefits. You may wish to consult with a 

qualified individual or organization about any possible tax or other consequences resulting from 

your receipt of this payment. 

If you have any questions concerning the release or settlement or if anyone seeks to 

collect a debt arising from your mortgage, please contact [Insert Independent Consultant Name] 

at [Insert Contact Information including a phone number]. 

H - 24

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GARCIA 04482
We are committed to serving the financial needs of our customers who serve in the 

military, and we regret any error that may have occurred on your account. 

 Sincerely, 

[Name] 

[Title] 

Enclosure: Release

H - 25

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GARCIA 04483
RELEASE

 In consideration for the parties’ agreement to the terms of the Consent Order entered 

in_________________________________ , and the Defendant’s payment to me of 

$______________, pursuant to the Consent Order, I hereby release and forever discharge any 

claim under Section 521 of the Servicemembers Civil Relief Act for lost equity in the property 

related to the litigation referenced above and arising prior to the entrance of this Order, that I 

may have against the Defendant, all related entities, parents, predecessors, successors, 

subsidiaries, and affiliates, and all of its past and present directors, officers, agents, managers, 

supervisors, shareholders and employees and their heirs, executors, administrators, successors or 

assigns. 

 Executed this day of , 20 .

 ________________________________________ 

 Signature 

 

 ________________________________________ 

 Print Name 

 ________________________________________ 

 Address 

H - 26

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GARCIA 04484
EXHIBIT H - 2

H - 27

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GARCIA 04485
[SCRA NOTIFICATION LETTER FOR SECTION 527 SERVICEMEMBER] 

Name of Servicemember 

123 Main Street 

City, State Zip code 

Re: Loan Number [Insert] 

Dear [Servicemember]: 

We write to inform you that ________________ (“the Bank”), entered into a settlement on 

_______________, with the United States Department of Justice regarding alleged violations of 

the Servicemembers Civil Relief Act (“SCRA”). This settlement resolves the Department of 

Justice’s allegations that the Bank charged servicemembers interest higher than six percent on 

mortgage loans that the servicemembers originated prior to entering active duty, despite 

receiving requests for interest rate relief and orders.

In connection with this settlement, the Department of Justice identified you as a person 

who may be eligible for financial compensation with respect to your loan [add loan number(s)].

Please read and carefully review the declaration attached to this letter. If it is accurate, please 

sign and return to us the release and declaration attached to this letter in the enclosed postage 

paid envelope. After we receive these documents, we will send you a check in the amount of 

[insert amount]. This amount includes any interest charges in excess of six percent and monetary 

damages. In addition, the Bank will request that all major credit bureaus remove any negative 

entries on your credit report resulting from the higher interest rate. This release and declaration 

must be returned by __________ .

You should be aware that the money you are eligible to receive may have consequences 

with respect to your federal, state, or local tax liability, as well as eligibility for any public 

assistance benefits you may receive. Neither the Bank nor the Department of Justice can advise 

you on tax liability or any effect on public assistance benefits. You may wish to consult with a 

qualified individual or organization about any possible tax or other consequences resulting from 

your receipt of this payment. 

If you have any questions concerning the declaration, release or settlement, please contact 

[Insert Independent Consultant Name] at [Insert Contact Information including a phone number]. 

We deeply appreciate your service to our country. We are committed to serving the 

financial needs of our customers who serve in the military, and we regret any error that may have 

occurred on your account. 

H - 28

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GARCIA 04486
 Sincerely, 

[Name] 

[Title] 

Enclosures: Release and Declaration 

H - 29

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GARCIA 04487
RELEASE

 In consideration for the parties’ agreement to the terms of the Consent Order entered 

in_________________________________ , and the Defendant’s payment to me of 

$______________, pursuant to the Consent Order, I hereby release and forever discharge all 

claims, arising prior to the entrance of this Order, related to the facts at issue in the litigation 

referenced above and related to the alleged violation of Section 527 of the Servicemembers Civil 

Relief Act, that I may have against the Defendant, all related entities, parents, predecessors, 

successors, subsidiaries, and affiliates, and all of its past and present directors, officers, agents, 

managers, supervisors, shareholders and employees and their heirs, executors, administrators, 

successors or assigns. 

 Executed this day of , 20 .

 ________________________________________ 

 Signature 

 

 ________________________________________ 

 Print Name 

 ________________________________________ 

 Address 

H - 30

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GARCIA 04488
[SCRA NOTIFICATION LETTER FOR SECTION 527 CO-BORROWER] 

Name of Co-borrower 

123 Main Street 

City, State Zip code 

Re: Loan Number [Insert] 

Dear [Co-borrower]: 

We write to inform you that ________________ (“the Bank”), entered into a settlement 

on _______________, with the Department of Justice regarding alleged violations of the 

Servicemembers Civil Relief Act (“SCRA”). This settlement resolves the Department of 

Justice’s allegations that the Bank charged servicemembers interest higher than six percent on 

mortgage loans that the servicemembers originated prior to entering active duty, despite 

receiving requests for interest rate relief and orders.

In connection with this settlement, the Department of Justice identified you as a person 

who may be eligible for financial compensation with respect to your loan [add loan number(s)].

If you sign and return to us the release attached to this letter in the enclosed postage paid 

envelope and your co-borrower signs and returns the declaration and release that will be sent 

separately to your co-borrower, we will send you a check in the amount of [insert amount]. This 

amount represents your portion of any interest charges in excess of six percent. In addition, the 

Bank will request that all major credit bureaus remove any negative entries on your credit report 

attributable to the higher interest rate. 

To receive this payment, you must return the attached release within six months of the 

date of receipt of this letter. The release, if signed, releases any claim to the return of excess 

interest that you may have under Section 527 of the SCRA; however, it does not release any 

other claim you may have under the SCRA, including Section 527, or other laws.

You should be aware that the money you are eligible to receive may have consequences 

with respect to your federal, state, or local tax liability, as well as eligibility for any public 

assistance benefits you may receive. Neither the Bank nor the Department of Justice can advise 

you on tax liability or any effect on public assistance benefits. You may wish to consult with a 

qualified individual or organization about any possible tax or other consequences resulting from 

your receipt of this payment. 

If you have any questions concerning the release or settlement, please contact [Insert 

Independent Consultant Name] at [Insert Contact Information including a phone number]. 

H - 31

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GARCIA 04489
We are committed to serving the financial needs of our customers who serve in the 

military, and we regret any error that may have occurred on your account. 

 Sincerely, 

[Name] 

[Title] 

Enclosure: Release 

H - 32

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GARCIA 04490
RELEASE

 In consideration for the parties’ agreement to the terms of the Consent Order entered 

in_________________________________ , and the Defendant’s payment to me of 

$______________, pursuant to the Consent Order, I hereby release and forever discharge any 

claim under Section 527 of the Servicemembers Civil Relief Act for the return of excess interest 

for my loan, ___________[insert loan number], related to the litigation referenced above and 

arising prior to the entrance of this Order, that I may have against the Defendant, all related 

entities, parents, predecessors, successors, subsidiaries, and affiliates, and all of its past and 

present directors, officers, agents, managers, supervisors, shareholders and employees and their 

heirs, executors, administrators, successors or assigns. 

 Executed this day of , 20 .

 ________________________________________ 

 Signature 

 

 ________________________________________ 

 Print Name 

 ________________________________________ 

 Address 

H - 33

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GARCIA 04491
EXHIBIT H - 3

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GARCIA 04492
IMPORTANT NOTICE AFFECTING MILITARY SERVICEMEMBERS

WAIVER OF RIGHTS AND PROTECTIONS AFFORDED UNDER

THE SERVICEMEMBERS CIVIL RELIEF ACT

Attached to this notice you will find a waiver of rights and protections that may be applicable to

you and your dependents pursuant to the Servicemembers Civil Relief Act, 50 App. U.S.C. §

501, et seq. (the “SCRA”). The SCRA provides military personnel and their dependents with a

wide range of legal and financial protections. Among other benefits and protections, the SCRA:

• Upon request by the servicemember, imposes a maximum rate of interest that may

be charged on debt obligations incurred by an eligible servicemember before the

servicemember began his or her current military service.

• May restrict or prohibit the sale, foreclosure, or seizure of real estate pursuant to a

pre-service debt obligation, except where the lender has obtained a valid court

order approving the sale, foreclosure, or seizure of the real estate.

• May prohibit a landlord or lender from evicting a servicemember or the

servicemember’s dependents from his/her residence, except where the lender has

obtained a valid court order approving the eviction.

• May, in a court action, give the servicemember the right to postpone the case

under certain conditions.

• May, in a court action, give the servicemember the right to have the terms of the

mortgage obligation adjusted under certain conditions.

[Judicial State / Non-Judicial State Paragraph - Insert Applicable Paragraph]

[Judicial State] If you choose to sign the waiver, the bank will have the option to proceed with a

foreclosure, sale and eviction without the protections of the SCRA. If you do not sign this

waiver, the Bank will be required to provide you the protections of the SCRA. You may be able

to seek a postponement of any foreclosure or eviction action, and, in the case of foreclosure, an

adjustment of the mortgage obligation. Additionally, the court should take steps to ensure that a

judgment is not entered against you if you are unable to appear. 

[Non-Judicial State] If you choose to sign the waiver, the bank will have the option to proceed

with a foreclosure, sale and eviction without going to court. If you do not sign this waiver, the

bank will be required to obtain a court order in order to foreclose (if you incurred your debt

before you went into military service) or to evict you from your home. You may be able to seek

a postponement of any foreclosure or eviction action, and, in the case of foreclosure, an

adjustment of the mortgage obligation. Additionally, the court should take steps to ensure that a

judgment is not entered against you if you are unable to appear.

Before waiving these important statutory rights, you should consult an attorney regarding

how best to exercise your rights or whether it is in your interest to waive these rights under

the conditions offered by the bank.

As an alternative to foreclosure, the bank may offer its borrowers the options of pursuing a short

sale of their property or executing a deed in lieu of foreclosure. Borrowers in default may find

H - 35

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GARCIA 04493
these options to be preferable to foreclosure. Any negotiation for a short sale or deed in lieu of

foreclosure is not a threat of current or future litigation, and should not be considered as such.

For More Information:

• CONSULT AN ATTORNEY: To fully understand your rights under the law, and

before waiving your rights, you should consult an attorney.

• JAG / LEGAL ASSISTANCE: Servicemembers and their dependents with questions

about the SCRA should contact their unit’s Judge Advocate, or their installation’s

Legal Assistance Officer. A military legal assistance office locator for all

branches of the Armed Forces is available at

http://legalassistance.law.af.mil/content/locator.php

• MILITARY ONESOURCE: “Military OneSource” is the U.S. Department of

Defense’s information resource. Go to www.militaryonesource.com

H - 36

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GARCIA 04494
WAIVER OF RIGHTS UNDER

SERVICEMEMBERS CIVIL RELIEF ACT

I ______(NAME)_____ am a [servicemember] [dependent of ______(NAME)_______, a

servicemember], and I am aware that I have protections available to me under the

Servicemembers Civil Relief Act (SCRA). This includes, but is not limited to, legal rights

relating to the property securing my mortgage loan, including protection against a sale,

foreclosure, seizure, eviction or unlawful detainer action related to the property listed below.

[ADDRESS OF PROPERTY]

I acknowledge that: 

• By signing this waiver, I am waiving the SCRA protections related to the property

listed above, including any protections against a sale, foreclosure, seizure,

eviction or unlawful detainer action, as well as relating to the right of redemption.

• This waiver applies to any form of proceeding or transaction through which

someone else receives ownership and/or possession of the property securing my

loan, including a foreclosure short sale, deed-in-lieu of foreclosure, cash-for-keys,

etc. This waiver applies not only to any such proceedings or transactions that are

in process at the time I sign this waiver, but also to proceedings or transactions

that are started after I sign this waiver.

• The above described property secures my mortgage loan, account number: 

_______________________.

• In exchange for waiving my SCRA rights with respect to this property, the Bank

has agreed to provide _____________ (insert one - a short sale, cash for keys

agreement, deed-in-lieu of foreclosure, or other valuable consideration). This

waiver does not become effective until _____________ (insert item listed above)

is executed and completed. If for any reason, the __________ (insert item listed

above) is not executed and completed, this waiver shall become null and void.

Subject to the above provisions, I hereby waive and give up the right to these protections under

the SCRA with respect to the above listed property and any right I may have had to a stay of

proceedings or adjustment of the mortgage obligation in a foreclosure action. 

__________________________________ Date:_____________________

 (Signature)

__________________________________

 Printed Name

H - 37

Case 1:12-cv-00361-RMC Document 14-1 Filed 04/04/12 Page 223 of 223 Case 1:12-cv-00361-RMC Document 1-2 Filed 03/12/12 Page 314 of 314

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