Bank settlement could bring $335 million to North Coast
Published: Thursday, February 9, 2012 at 1:51 p.m.
Last Modified: Friday, February 10, 2012 at 7:28 a.m.
Distressed homeowners on the North Coast will receive $335 million under a landmark $25 billion agreement announced Thursday to settle allegations of mortgage abuses by five of the nation's largest lenders.
Sonoma County could receive an estimated $267 million, Mendocino County $25 million and Lake County $43 million, the state Department of Justice said Thursday.
“California families will finally see substantial relief after experiencing so much pain from the mortgage crisis,” Attorney General Kamala Harris said in a statement.
But consumer and housing advocates said the deal didn't go far enough.
“It sure doesn't seem like a lot for someone who lost their home maybe illegally, but it is what it is,” said Jami Walsh, foreclosure counselor with Catholic Charities in Santa Rosa. “It's a shot in the arm that we've all been waiting for, and we'll take it, whatever it is. This is giving people some hope.”
The settlement aims to help troubled borrowers by requiring the five banks to reduce the amount borrowers owe on their mortgages, lower their interest rates and pay restitution to homeowners who suffered mortgage-related abuses. It will force lenders to revamp how they interact with struggling mortgage holders and bar them from trying to foreclose on borrowers while simultaneously negotiating mortgage modifications.
In addition, firms will have to make sure borrowers have a single point of contact with a lender, rather than being shuttled to different employees with each interaction.
The deal grew out of an investigation by all 50 state attorneys general into revelations that banks had evicted borrowers with incomplete or false documentation.
Nationwide, the settlement includes $1.5 billion in restitution payments to victims of improper foreclosures. Spread among an estimated 750,000 potential recipients, that amounts to only $2,000 per person.
“That's such a tiny amount compared to what they lost,” said Georgia Berland, executive officer of the Sonoma County Task Force for the Homeless. “To me that just seems minuscule really, and I don't see how that will change someone's life. It's not going to get someone out of homelessness, for sure.”
Accepting a settlement payment will not preclude individuals from filing their own actions against the banks.
Just who will benefit is likely to remain a question for months. It could be six to nine months before settlement administrators, attorneys and mortgage servicers identify who will receive cash payments, principal reductions and modifications.
“I've already had people sending me emails today, asking me, ‘Is this going to help me?' And I really can't answer that yet,” Walsh said.
Overall, the state secured $18 billion in the settlement, Harris said.
The bulk of that money, more than $12 billion, will help approximately 250,000 homeowners who are underwater on their loans, or behind or almost behind in their payments, to reduce the principal on their loans or offer short sales. That's a fraction of California's more than 2 million “underwater” borrowers, whose homes are worth less than their mortgages.
Other California commitments include $849 million dedicated to refinancing the loans of 28,000 homeowners who are current on their payments but underwater on their loans. And $279 million will be dedicated to offering restitution to approximately 140,000 California homeowners who were foreclosed upon between 2008 and the end of 2011.
Another $1.1 billion will go to unemployed payment forbearance, transition assistance and communities to repair blight left by 16,000 recent foreclosures. And $3.5 billion will be dedicated to relieving 32,000 homeowners of unpaid balances remaining when their homes are foreclosed.
The agreement covers mortgages owned by Bank of America/Countrywide, Wells Fargo/Wachovia, JPMorgan Chase/Washington Mutual Chase, Citigroup and Ally Financial-GMAC. Fannie Mae and Freddie Mac were not a part of the deal.
“I will continue to fight for principal reductions for the approximately 60 percent of California homeowners whose loans are owned by Fannie Mae and Freddie Mac,” Harris said.
For more information, visit www.nationalmortgagesettlement.com.
The Washington Post contributed to this report.
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