Foreclosure-Gate and the $25 Billion National Mortgage Settlement: Implications for Future Litigation Exposure and Taxpayer Liability

Controversy surrounding alleged illegal foreclosure practices led to a February 2012 settlement of $25 billion with the nation’s five largest mortgage servicers, brought forth by the U.S. Department of Housing and Urban Development, the Justice Department, and Attorneys General from 49 states. In this policy brief, we describe the legal and policy issues that led to the 2010 Foreclosure- Gate controversy, outline the resulting National Mortgage Settlement, and consider implications for future litigation exposure among mortgage industry participants and taxpayers, who remain liable for losses on mortgages owned or guaranteed by the federal government.