Settlement may bring relief to stressed homeowners

Portion of $25 billion from mortgage giants could help Clark County residents

By Cami Joner, Columbian retail & real estate reporter

Published:

 
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Where to go for help

State Attorney General Rob McKenna warned that it could take time for borrowers to find out whether they are eligible for relief, to be distributed over a three-year period. He said banks would contact borrowers in some cases. Consumers may also contact the banks directly for more information at:

Bank of America: 877-488-7814

Citigroup: 866-272-4749

Chase: 866-372-6901

GMAC: 800-766-4622

Wells Fargo: 800-288-3212

Source: Washington State Office of the Attorney General

ON THE WEB

For more information, visit:

National Mortgage Settlement

Washington Attorney General

Clark County homeowners who are sinking under a high mortgage payment or owe more for their house than it’s worth could be thrown a lifeline as part of a $25 billion national settlement.

The deal translates to $648 million in benefits for Washington’s troubled homeowners and foreclosure victims, State Attorney General Rob McKenna said Thursday during a phone conference. Oregon will receive between $100 million and $200 million, officials from that state said.

McKenna served on the eight-member executive team negotiating the landmark settlement with the nation’s five largest mortgage servicers, Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co., Citigroup Inc. and Ally Financial Inc., formerly GMAC.

“In order to qualify, the homeowner must have a loan still owned by one of these five banks,” McKenna said.

He explained that the bulk of the state’s settlement money would go toward helping mortgage holders who face imminent foreclosure.

To that end, the five banks agreed to spend $17 billion -- up to $483 million in Washington state -- to modify a number of at-risk loans by reducing

the principal of mortgages where the balance owed is more than the home could fetch on the market. A portion of the $483 million also is earmarked to help borrowers who are behind on their payments but still have a reasonable chance of success to catch up.

“I think anything like this is good, anything that can help people stay in their homes,” said Kevin Gillette, executive director of the Community Housing Resource Center, a Vancouver nonprofit that offers financial and mortgage default counseling.

He said mortgage reductions are almost unheard of for the bigger banks, such as the five listed in the settlement. Gillette, whose agency provided counseling to nearly 700 local households in 2011, said the housing center still has very few success stories to share when it comes to rescuing homeowners from foreclosure.

“It’s no better than it was four years ago,” he said, but Gillette was heartened by Thursday’s news.

The state settlement might even help Lydia Mann, who has struggled for three years to stave off the bank foreclosure of her Vancouver home.

“I’m expecting any day somebody to come to the door and kick me out. And where am I going to live with my six-year-old grandson?” asked Mann, 62, who started falling behind on her mortgage payments in 2009 after an injury left her unable to work.

Mann has been spending more than half of her monthly disability check on a program she thought would save her home, but her bank recently told her she’s still falling behind.

“This gives me a little bit of encouragement,” Mann said of Thursday’s announcement.

Local share unknown

It is unclear how much of the state’s settlement portion is earmarked to help local homeowners.

There were 2,696 foreclosed houses sold in Clark County in 2011, earning the county the third-highest rate of foreclosure among Washington’s 39 counties, according to RealtyTrac Inc., a California-based data service.

The state’s portion of the settlement includes $84 million earmarked for borrowers across the state who are current on their payments, but still underwater -- owing more on their mortgages than their houses are worth -- due to home values that have fallen steadily since 2008.

The $25 billion national settlement “will help stabilize the residential market by helping people get out from under high mortgage payments,” McKenna said.

The settlement grew out of an investigation of the nation’s five largest mortgage servicers. The investigation was launched in 2010 by all 50 state attorneys general amid an uproar over revelations that people were evicted by banks using false or incomplete documentation and “robo-signers,” people who rushed to sign thousands of documents a day without reviewing the details. Relief is expected to go to 49 states, all except Oklahoma.

Foreclosed properties

Nationwide, the banks will reduce loans for about 1 million households that are at risk of foreclosure. The lenders will also send $2,000 each to about 750,000 Americans who were improperly foreclosed upon from 2008 through 2011. The banks will have three years to fulfill terms of the deal.

In exchange, the states have agreed not to pursue civil charges over the abuses covered by the settlement. Homeowners can still sue lenders on their own, and federal and state authorities can still pursue criminal charges. The deal, reached after 16 months of contentious negotiations, is subject to approval by a federal judge. It’s the biggest settlement involving a single industry since the $206 billion multistate tobacco deal in 1998.

About $24 million in Washington will be used to compensate homeowners who were foreclosed upon between Jan. 1, 2008, and Dec. 31, 2011, if the mortgage was held by one of the five banks that settled. The foreclosure victims could receive up to $2,000 in the form of direct payments within the next three to nine months, McKenna said.

Consumer protection

In Clark County, an estimated 12,694 county foreclosures were sold from Jan. 1, 2008 through Dec. 31, 2011.

In addition to direct payments and loan modifications, the attorney general said $45 million of the settlement would be used for consumer protection and foreclosure programs across the state. He is asking state legislators to form a bipartisan, blue-ribbon committee to help determine the best way to allocate the money.

The news sounded encouraging to Gillette, who has spent the last four years counseling struggling homeowners.

“It could benefit centers such as ours that do this kind of work,” Gillette said. “And I also would think some of this money should go into homebuyer education, to help build the industry back up.”

The center employs five workers in offices at 103 E. 29th St. in Vancouver.

McKenna stressed the settlement does not protect banks from criminal prosecutions. It also does not prevent homeowners or investors from pursuing individual, institutional or class-action civil cases.