California to Get $18 Billion in Mortgage Deal
February 9th, 2012
The Bay Citizen
by: Aaron Glantz
California Attorney General Kamala Harris announced Thursday morning that she had secured up to $18 billion as part of a national settlement with the nation’s largest banks over over their fraudulent foreclosure practices.
In a statement released ahead of a morning press conference to announce the agreement, Harris said the accord amounted to “an historic amount of relief for California homeowners.”
“Hundreds of thousands of homeowners will directly benefit from this California commitment,” she said.
The Obama administration has pushed hard for the settlement, under which Bank of America, JPMorgan Chase, Wells Fargo, Citibank and Ally Financial would pay billions of dollars to defrauded homeowners in exchange for a release from further civil liability.
Harris’ announcement came the same day U.S. Attorney General Eric Holder announced a national deal in Washington.
Harris has consistently taken a hard line in the negotiations, with her office declaring as recently as Jan. 25 that the deal was “inadequate.” When Harris walked out of the talks last fall, she argued the settlement asked California to “excuse conduct that has not been adequately investigated.”
In her statement Thursday, she said her negotiating strategy helped increase California’s share of the settlement from $4 billion to $18 billion.
Labor and consumer advocacy groups that supported Harris’s negotiating strategy cheered the result.
“Where I come from, $18 billion is real money,” said Bruce Mirken, spokesman for the Greenlining Institute, a Berkeley-based advocacy organization.
“It is still not equal to the very large hit that communities have taken, but it’s a meaningful step. Obviously the devil is going to be in the details,” he said.
According to Harris, more than $12 billion will go towards reducing the principal on loans or offering short sales to approximately 250,000 California homeowners who owe more on their homes than they are worth and are behind on their mortgage payments.
Another $279 million will be dedicated to restitution for approximately 140,000 California homeowners who lost their homes to foreclosure between 2008 and December 31, 2011, Harris said, an average of $2,000 per person.
Under the terms of the deal, the banks also agreed to change the way they negotiate loan modifications in California. According to Harris, the deal requires Bank of America, JPMorgan Chase, Wells Fargo, Citibank and Ally Financial to end the process of “dual tract” foreclosures, where a consumer can be negotiating for more favorable mortgage terms with one part of a financial institution — even as another office in the same bank is foreclosing on them.
In an interview, Dustin Hobbs, spokesman for the California Mortgage Bankers Association, said it was “too soon to tell” how much the settlement would change the banking industry.
The settlement only covers five financial institutions, he noted, and only loans that those banks own themselves. Homeowners who have borrowed money from the five banks that settled will only be eligible for relief if their bank actually owns their home loan.
Approximately 60 percent of California home loans are owned by Fannie Mae and Freddie Mac, and those loans are not covered by the settlement.
“While the settlement should help restore some level of certainty and confidence to the market, it is not the solution to every problem,” Hobbs said.
Mirken, of the Greenlining Institute said such complicated rules makes Harris’ task more difficult.
“It is one thing to announce this thing and to sign a deal, but its another to make sure that people who may not be checking the attorney general’s web site know that this is happening and how they can get it,” he said.
Source: The Bay Citizen (http://s.tt/15Cq9)