Banks have spent more than $850 million in Massachusetts to settle government lawsuits over faulty lending practices that triggered the housing crisis, helping some 17,240 of the state’s homeowners reduce the amount of their loans or their interest rates in the past five years, according to a new report by Attorney General Martha Coakley.
The report, released Monday, is the first accounting of the 10 mortgage settlements that were designed to hold financial institutions accountable for risky subprime loans and keep Massachusetts residents from losing their homes after values plummeted, occupants lost their jobs, and loans with balloon rates suddenly came due.
Massachusetts homeowners received reductions on their home loans that ranged from an average of less than $4,000 to nearly $100,000, depending on which company held their mortgage and the amount of the settlement.
The state’s $125 million settlement with a subsidiary of H&R Block Inc. resulted in affected Massachusetts homeowners getting their principal reduced by an average of $97,000.
But the $18 million settlement with Countrywide Financial Corp. meant that borrowers received only $3,968 of relief on their principal payments.
These settlements were an attempt to, “keep to people in their homes if they were salvageable,” Coakley said. “It’s really made a big difference.”
However, the state has not tracked whether these payments were enough to keep consumers in their homes a year or two after receiving assistance.
Some families may have eventually lost their homes, either because the bank foreclosed or they decided to sell later when the market improved, Coakley said.
Still, the settlement money provided them some relief to reduce their debt or to wait it out for a better economy.
“Had we not done that . . . it would have been much worse,” Coakley said.
Foreclosures in Massachusetts have declined from the highs of recent years.
There were 439 petitions, the first step in the foreclosure process, filed in February compared with 856 petitions filed in the same month of 2013, according to the Warren Group, a Boston-based real-estate tracking firm.
The real-estate market has recovered dramatically, aided by an improving economy, although there are some persistent neighborhood pockets that are struggling with foreclosures, said Tim Davis, a research consultant who helps publish the Foreclosure Monitor for the Massachusetts Housing Partnership.
“We’re doing cleanup of the whole subprime lending bubble,” Davis said.
It is unclear how much of a role the settlements played in lowering the state’s foreclosure rate, because there isn’t concrete data on individual homeowners, he said.
Still, if banks reduced the loan amount homeowners owed, as occurred in some of these settlements, that would have helped families and increased their chances of staying in their house, he said.
“It means that you’re realigning it to the market to what people can afford,” Davis said.
Coakley was among several attorneys general who sued banks following the housing crisis. The largest pot of money, $631 million to Massachusetts, came from the national mortgage settlement with five banks.
However, only slightly more than half of that money was used to reduce the principal payments for borrowers. Banks also wrote checks of about $1,500 to borrowers who had lost their homes in foreclosure and some of the relief occurred through short sales, which still meant the homeowners lost the properties.
Massachusetts also used $44.5 million of a national settlement to create HomeCorps, a program staffed with loan modification specialists, to help distressed borrowers negotiate with their banks. The program prevented more than 1,000 foreclosure auctions and helped modify 2,300 loans, according to state officials.
Barbara Catalini, 77, of Gloucester, said she tried to get her loan modified twice after her husband was diagnosed with dementia and could no longer work. Her mortgage company repeatedly refused her any relief, until she went to HomeCorps, Catalini said.
The company eventually agreed to reduce her interest rate from nearly 7 percent to 2 percent and cut her monthly mortgage payments in half to about $880. That has allowed Catalini and her husband to stay in the house they bought about eight years ago after renting for many years.
“My husband loves this place. He loves working in the yard and he loves feeding our birds,” Catalini said. “The doctor did say, if he went somewhere else he could get confused.”
Homeowner advocates said they wanted banks to spend more of the national settlement money on principal reductions, which would have helped consumers stay in their homes. But through the HomeCorps program the attorney general’s office also set aside $6 million to pay for lawyers to represent homeowners who were being evicted or had lost their homes to foreclosure, said Steve Meacham, an organizing coordinator with Jamaica Plain-based City Life/Vida Urbana, a community group that works with distressed homeowners.
“The fact that there were more attorneys hired because of Homecorps was significant,” Meacham said. Sometimes, “you can get more from the bank after foreclosure.”
More than $128 million in mortgage settlement money also went into the state’s coffers or the public employees pension reserve fund for investment losses related to subprime mortgages, according to the report.Deirdre Fernandes can be reached at firstname.lastname@example.org. Follow her on Twitter @fernandesglobe.