$318m for state in banks deal
Relief expected for homeowners; Coakley pushing mortgage giants
Thousands of Massachusetts homeowners are likely to benefit from the state's $318 million share of a landmark multibillion-dollar settlement unveiled yesterday between the nation's attorneys general and five major US banks that had a role in the country's foreclosure crisis.
The $25 billion deal comes after months of talks with the companies: Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co., Citigroup Inc., and Ally Financial Inc. It still requires approval from US District Court in Washington, which could come later this month.
Massachusetts Attorney General Martha Coakley said the agreement will allow many property owners who make payments to one of the lenders to reduce mortgage debt, lower interest rates, or receive other assistance to save their homes. Some families who already lost homes to foreclosure will receive a modest cash settlement.
''Immediate relief and continued enforcement, that is what we have achieved,'' Coakley said at an afternoon press conference. ''The banks will provide an immediate infusion of millions of dollars in relief for struggling homeowners.''
More than 30,000 Massachusetts homeowners have lost properties to foreclosure over the last three years and tens of thousands more are at risk of losing their homes. The crisis, however, has been far more severe in states such as California, Florida, and Nevada. Across the country, about 2 million homeowners are expected to receive assistance through the settlement.
The agreement — which was signed by every state except Oklahoma—stems from an investigation launched more than a year ago by the 50 attorneys general into allegations of mortgage fraud and sloppy foreclosure practices. Coakley said she held out on signing onto the deal until she was assured that it would offer significant assistance to homeowners and would not keep her from pursuing other litigation related to unlawful foreclosures in Massachusetts.
Coakley yesterday called the agreement appropriate and said it was part of a larger effort by her office to resolve the state's foreclosure crisis. She also is pushing mortgage giants Fannie Mae and Freddie Mac — which were not involved in the settlement talks — to do more to help homeowners and has joined a government task force that is investigating criminal complaints against mortgage companies and their leaders.
''We believe there is much work to do,'' Coakley said. ''We needed to get some remedies in place.'' As part of the arrangement, the lenders are generally released from claims relating to originating, foreclosing on, and servicing loans — meaning they handle monthly payments. But it does not prevent state and federal authorities from filing criminal claims, or keep individual borrowers from bringing their own lawsuits.
The deal was greeted with hope and some skepticism by housing advocates and borrowers who have long tried to fend off foreclosure.
Melonie Griffiths, lead organizer with the Jamaica Plain housing nonprofit City Life/Vida Urbana, said she is pleased that lenders are agreeing to cut mortgage payments, but added that such measures alone will not be enough to repair the housing market. ''It is not half of what is needed to get the economy back on track,'' Griffiths said.
Homeowner Ronald Gigliello, of Lynnfield, was more cynical. Gigliello said he has spent years trying to get a loan modification from Bank of America, and does not believe lenders will reduce homeowners' principal enough to make a difference. ''I don't think it is going to help anybody,'' he said.
Representatives of the lenders said the deal allows their banks to proceed with efforts to assist stressed borrowers.
Citigroup officials said the settlement will be paid in parts over the next three years, including cash allocated to individual states. The final terms must be approved by Citigroup's board of directors, they said.
Bank of America officials said the agreement will bring ''more certainty to the housing market.''
In Massachusetts, funding includes about $224 million for loan modifications, principal reductions, and other relief. Another $14.6 million will be set aside for eligible former borrowers who lost their properties to foreclosure with cash payments of about $1,500 to $2,000. It is still unclear how many people will qualify for cash payments.
The deal also will provide nearly $33 million to borrowers whose loans are ''underwater'' —meaning their properties are worth less that what they owe. In addition, the state will receive a direct payment of about $46.6 million to help homeowners avoid foreclosure.
In December, Coakley sued the five big banks for allegedly illegally taking back properties, filing fraudulent foreclosure documents, and failing to come to the aid of borrowers who could have stayed in their homes if they had been allowed to make lower monthly mortgage payments.
She also sued the private Virginia lender-created company Mortgage Electronic Registration Systems Inc., claiming it was set up to let lenders avoid state requirements that they record mortgage transfers. She has said the system conceals the true identity of mortgage holders.
Under the agreement, Coakley can go forward with claims against MERS and allegations that banks completed foreclosures here without having the proper paperwork beforehand.
Homeowners whose loans are held or serviced by one of the five companies involved in the settlement should contact their lender. They can also call Coakley's office at 617-963-2170, or go to www.nationalmortgagesettlement.com for more information.