five biggest banks.
As part of the settlement -- more than a year in the making -- Ally/GMAC, Bank of America, Citi, JPMorgan Chase, and Wells Fargo will pay as much as $25 billion in relief to homeowners and payments to states and the federal government to settle investigations that found the loan servicers foreclosed on homeowners without properly verifying underlying documents (a practice referred to as robo-signing).
Harris pulled out of the settlement negotiations last September, complaining the amount of relief for homeowners in the state -- $ 4 billion -- was too little. She also balked at a provision to shield the banks from future investigations.
Up until the final hour, Harris signaled the state would not join the multi-state settlement, even missing a Monday filing deadline to do so.
"California families will finally see substantial relief after experiencing so much pain from the mortgage crisis," said Harris in a statement. "Hundreds of thousands of homeowners will directly benefit from this California commitment."
"This outcome is the result of an insistence that California receive a fair deal commensurate with the harm done here. We insisted on homeowner relief for Californians and demanded enforceability so homeowners actually see a benefit that will allow them to stay in their homes, and preserved our ability to investigate banker crime and predatory lending," continued Harris.
The deal sets aside $12 billion in principal reductions to California homeowners. It also provides $279 million in compensation to about 140,000 homeowners who were foreclosed upon between 2008 and 2011, who may have been the victims of robo-signing. That’s roughly $2,000 for those who lost their homes to foreclosure. Only homeowners whose loans are owned or serviced by one of the five banks would qualify for relief.
"Well, for me $2,000 will help on the tax debt that I’m in,” said Brenda Fuller, who lost her two-bedroom condo in East Oakland to foreclosure about a year ago, and still faces a significant amount of tax debt. “I’ll take all the help that I can get, I’m not going to complain about anything. I would prefer they pay the entire debt, but you know, whatever they give me is a gift and would help me out."
From 2008-2011, there were more than 750,000 completed foreclosures in California, according to RealtyTrac. Last year, the state had the third- highest foreclosure rate in the country. And, the crisis is far from over.
There are 2,110,970 borrowers in California who are estimated to be under water, meaning that they owe 25 percent more on their mortgage than their property is worth. Last year, one in 31 housing units in the state had at least one foreclosure filing.
"[Harris] hung tough and increased the amount California got,” said Bruce Mirken, spokesperson for the non-profit Greenlining Institute, a multi-ethnic policy research institute. He called the funds set aside to provide principal reductions to a quarter of a million homeowners in the state “meaningful,” but added that it doesn’t help everyone who needs it and more needs to be done to help troubled homeowners.
“Fannie and Freddie are reluctant to do principal reductions. That’s a significant part of the problem that’s not solved and we don’t want to lose track of that either,” he said.
Harris said she would continue to fight for principal reductions for “60 percent of California homeowners whose loans are owned by Fannie Mae and Freddie Mac.”
Fontana resident Peggy Mears says the settlement would not affect her personally. After three years of struggling, Mears and her husband finally got a loan modification from her lender that helped her to afford the monthly payments and stay in her home. Freddie Mac owns her home loan, and the servicer is One West Bank.
Mears lauded the “accomplishments of the attorney general,” and called the settlement a “step in the right direction.” She says Harris was able to get the banks to finally offer principal reductions – a type of loan modification that many housing advocates have said could truly help homeowners.
“The banks wouldn’t even consider principal reduction,” Mears said. “She [Harris] was able to do something others weren’t able to do.”
Mears says the potential impact of the settlement is much bigger in reforming certain practices among the five banks that could have cause a ripple effect of change in the mortgage banking industry.
“We believe this settlement will help provide additional support for homeowners who need assistance, bring more certainty to the housing market and aligns to our ongoing commitment to help rebuild our neighborhoods and get the housing market back on track,” said a Bank of America spokesperson in an e-mailed statement.
Jose Rodriguez, president and CEO of El Concilio, a referral services organization serving the Latino community in San Joaquin and Stanislaus Counties, agreed with Mears, adding that the settlement is
poised to bring bigger reforms that will benefit all homeowners in the state.
“I’ve noticed, she’s [Harrris] asking for a single point of contact [for the bank] for homeowners to deal with,” he said, adding that the current process, which involves multiple people and departments, breeds frustration among homeowners because documents are routinely lost in the process, forcing homeowners to resubmit paperwork over and over again.
Rodriguez said Harris, who attended a town hall in Stockton last month, heard the concerns and stories of homeowners.
“She heard that loud and clear,” he said. “Even though it [the settlement] is limited to certain banks, it sets a precedent for other banks to follow that are not covered by the settlement.”
In a press release, Harris said she would also push for an end to the “dual-track process” -- when banks initiate foreclosure proceedings before a loan modification decision.
Rodriguez said the funds set aside in the settlement for forbearance for unemployed homeowners is another key benefit that will help to stem future foreclosures.
The deal sets aside an estimated $1.1 billion to be distributed to homeowners in this situation, and nearly $850 million to help tens of thousands of homeowners whose properties are under water to refinance the loan.
Rodriguez says he would have liked to have seen a provision in the settlement that helps homeowners repair their credit, an essential part of helping them to start over after a foreclosure. Still, he says the settlement sends a message to homeowners that could ultimately boost consumer confidence.
“They can be homeowners,” he said. “They can own a piece of the American Dream.”
To see if you are eligible for relief under the settlement, click here.
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