Ohio’s share of the settlement
$103 million will go for modifications of loan terms and other homeowner relief.
$44 million in payments will go to homebuyers who lost their homes to foreclosure from Jan. 1, 2008, through Dec. 11, 2011.
$90 million is for refinancing loans for homeowners who are who are underwater.
$97 million for programs to including helping homeowners avoid foreclosures, getting rid of blighted properties and investigating mortgage rescue scam artists.
By Randy Tucker
Staff Writer
Ohio will receive $335 million as its part of a landmark settlement with the nation’s biggest mortgage lenders over foreclosure abuses, 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 and homeowners whose mortgages are underwater, which means they owe more than their home is 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, but DeWine couldn’t say exactly how many Ohio borrowers.
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.
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.
Lorie DiStaola, executive director of Neighborhood Housing Services of Hamilton Inc., said the settlement is a step in the right direction. Neighborhood Housing is a certified foreclosure counseling agency for Butler County.
“It’s so new. We hope that’s another outlet that can keep homeowner’s in their homes,” DiStaola said.
She still wants to know the criteria for who will qualify for help, what entity in Ohio will oversee this and how soon the funds are in place.
“I don’t know what to think. At this point, every little bit that funnels back to homeowners is a good thing,” said Tom Sherick, senior vice president of Gem Real Estate Group at its Cincinnati office. “Every little bit helps, but I don’t know if this is necessarily going to end up being a big deal.”
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 mortgage 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 of loans from 2003 through most of 2009. Bank of America acquired Countrywide in 2008.
About the Author