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Ohio receives $335M in housing assistance

Part of state’s share of  $25B settlement will help  homeowners refinance.

The $25 billion settlement will benefit borrowers in Ohio and 48 other states who have already lost their homes to foreclosure, fallen behind on mortgage payments, or who owe more than their homes are worth.

Chris Stewart/Dayton Daily News Staff Photogra The $25 billion settlement will benefit borrowers in Ohio and 48 other states who have already lost their homes to foreclosure, fallen behind on mortgage payments, or who owe more than their homes are worth.

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By Randy Tucker, Staff Writer Updated 7:33 AM Friday, February 10, 2012

Ohio will receive $335 million as its part of a landmark settlement with the nation’s biggest mortgage lenders over foreclosure abuses that followed the collapse of the nation’s housing market, Ohio Attorney General Mike DeWine said Thursday.

The $25 billion settlement will benefit borrowers in Ohio and 48 other states who have already lost their homes to foreclosure, fallen behind on mortgage payments, or who owe more than their homes are worth. It’s the biggest settlement involving a single industry since a 1998 multistate tobacco deal. The settlement would apply to borrowers who suffered mortgage servicing abuses between Jan. 1, 2008 and Dec. 31, 2011.

DeWine couldn’t say exactly how many Ohio borrowers that included.

Last month, there were 544,957 borrowers in Ohio who were seriously “underwater,” or owed at least 25 percent more on their mortgages than their properties were worth, according to market tracker RealtyTrac. And last year, 85,483 Ohioans were in some stage of foreclosure.

“We know there are still a lot of people out there hurting, and this is not going to make them whole. But it will help,” DeWine said Thursday.

The deal requires the nation’s five biggest mortgage lenders to reduce loans for about 1 million households at risk of foreclosure. The lenders will also send checks of $2,000 to about 750,000 Americans who were improperly foreclosed upon.

The five banks — Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial — will have three years to fulfill the terms of the deal.

Oklahoma struck a separate deal with the five banks.

Banks own about half of all U.S. mortgages — roughly 30 million loans. Those owned by mortgage giants Fannie Mae and Freddie Mac are not covered by the deal.

Anjanette Frye, president of the Dayton Area Board of Realtors, said mortgage relief can help stabilize the housing market and property values by giving more homeowners a chance to restructure loans.

“It’s too late for some of these people,” Frye said. “But this is a start at keeping the people who are left from the foreclosure crisis” in their homes.

DeWine said the state doesn’t anticipate receiving its share of the settlement until this spring. In the meantime, state officials will begin taking applications for relief in an effort to front-load the process.

The settlement ends year-long talks over robo-signing and other abusive practices by mortgage servicers. Under the deal, the states said they won’t pursue civil charges related to service abuses, but homeowners can still sue lenders in civil court on their own. And federal and state authorities can pursue criminal charges.

But consumer advocates and housing activists said the deal is flawed because it covers only a fraction of at-risk homeowners. Critics note that the settlement will apply only to privately held mortgages issued from 2008 through 2011.

“The deal announced today is too small,” said Pico National Network, a faith-based group that is active on housing issues. “It falls far short of providing real justice for homeowners and American families.”

Economists also cited the size of the deal: Some said it was hardly enough to have much impact on the troubled housing market.

Lenders that violate the deal could face $1 million penalties per violation and up to $5 million for repeat violators.

About $10 billion of the settlement total will be used to reduce mortgage payments for underwater homeowners. Paul Diggle, an economist at Capital Economics, said that’s a “drop in the ocean,” considering that 11 million borrowers are underwater “to the tune of $700 billion.”

Mark Vitner, a senior economist at Wells Fargo Securities, said the settlement helps the housing market in the long run because it allows banks to proceed with millions of foreclosures that have been stalled. Many lenders have refrained from foreclosing on homes as they awaited the settlement. “We’ve got a lot of issues to work our way through in the housing market,” Vitner said. “What this settlement does is allow that process to get started.”

Bank of America will pay the most to borrowers as part of the deal — nearly $8.6 billion. Wells Fargo will pay about $4.3 billion, JPMorgan Chase roughly $4.2 billion. Citigroup will pay about $1.8 billion and Ally Financial will pay $200 million. Those totals do not include $5.5 billion that the banks will reimburse federal and state governments for money spent on improper foreclosures.

The deal also ends a separate investigation into Bank of America and Countrywide for inflating appraisals from 2003 through most of 2009. Bank of America acquired Countrywide in 2008.

Staff Writer Laura A. Bischoff and the Associated Press contributed.

How the $25B settlement will be divided

Roughly $1.5 billion for direct payouts, in the form of $2,000 checks, for about 750,000 Americans who were unfairly or improperly foreclosed upon

$3.5 billion will go directly to states

At least $10 billion for reducing mortgage amounts

Up to $7 billion for other state homeowner programs

At least $3 billion for refinancing loans for homeowners who are current on their mortgage payments but who are underwater

Examining Ohio’s share

Ohio’s share of the $25 billion multistate settlement with five mortgage service companies is $335 million. Here is how that breaks down for Ohioans:

$103 million for borrowers in danger of foreclosure. The money will be applied as loan modifications, such as principle reductions or lower interest rates. These people will be identified by the settlement monitor but they may also call their mortgage servicer and ask for this assistance.

$44 million for borrowers who lost their homes to foreclosure from Jan. 1, 2008, to Dec. 11, 2011, and suffered mortgage service abuse. Roughly 20,000 Ohioans are expected to qualify for these cash payments. The average payment will depend on how many people apply. These borrowers will be notified by a third party administrator and then have 30 to 60 days to file their claims.

$90 million for borrowers who are currently 'underwater’ on their mortgages — they owe more than their homes are worth — but are current on their mortgages. This money will be applied as loan modifications that will allow them to refinance at current market rates or be forgiven negative equity.

$97 million for the state of Ohio to address housing problems. Ohio will use the money to demolish vacant houses, assist homeowners on the brink of foreclosure and investigate mortgage rescue scam artists.

Are you affected?

If you are interested in learning more about the mortgage and foreclosure settlement with the five major mortgage servicers, visit www.nationalmortgagesettlement.com .

Borrowers may also contact mortgage servicers directly:

Bank of America: 877-488-7814

Citibank: 866-272-4749

GMAC/Ally: 800-766-4622

JPMorgan Chase: 866-372-6901

Wells Fargo: 800-288-3212

If you do not pay your mortgage through those five companies, the settlement will not apply to you. But all Ohioans facing foreclosure may contact www.savethedream.ohio.gov or 888-404-4674 for assistance.

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