Mortgage settlement relief too slow for many homeowners

August 30, 2012 at 11:19 am

Earlier this year, Bank of America, Wells Fargo, JPMorgan Chase, Citigroup, and Ally Financial (formerly GMAC) settled with 49 state attorneys general over allegations of improper foreclosures based on robo-signing and seizures made without the proper paperwork. The banks agreed to a settlement package worth approximately $25 billion. This settlement was to be spread across the signing 49 states over three years, with North Carolina receiving $338 million in assistance.  North Carolina’s share breaks down as follows (full details here):

  • $63.7 million for housing counselors, legal help, financial fraud detection and prosecution, general economic reparation for the state.  Some of this includes fines and penalties, which will go towards the fund supporting public schools.
  • $33.57 million for NC foreclosure victims.
  • $179.51 million in principal reductions, short sale agreements, and other assistance over three years for homeowners at risk of default.
  • $61.52 million in principal reductions to help homeowners who are not at risk of default, but who currently owe more than their houses are worth.

That was back in February. Today’s Charlotte Observer reports that since then, some of these banks have been slow to provide relief. In North Carolina, less than 2,000 homeowners have received any aid.  Bank of America, which was slated to pay the most of the five banks, is the last to act.

Yesterday, the Office of Mortgage Settlement Oversight issued a progress report on the settlement. Overall, the five servicers have provide $10.561 billion in relief (see the chart below).

From the Office of Mortgage Settlement Oversight

More than 7,000 borrowers’ loan amounts have been reduced through $749.36 million in primary mortgage principal reductions. In North Carolina between March 1 and June 30,

• 85 principal reductions for homeowners owing more on their mortgages than the home is worth, totaling $3.5 million or about $41,000 per person.

• 815 short sales completed, offering $59 million in relief.

• 541 loans refinanced, saving homeowners about $3,500 on average per year.

None of this aid has come from  Bank of America, and many homeowners are still struggling to get the relief they need. North Carolina falls behind other states with the number of homeowners helped so far. In comparison to the 2,000 people helped here, 43,000 homeowners in California and 23,000 homeowners in Florida have been helped so far.
Overall, however, the point that was raised in yesterdays’ blog post remains true. Even with financial relief to homeowners, the more systemic problems that were caused by the mortgage crisis will remain. Relief for struggling homeowners is certainly important and necessary. But along with that, we also need policy and programs to help revitalize and strengthen the neighborhoods and communities that have been destabilized by this crisis.

 

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Entry filed under: Economic Development, Economy, Financial Reform, Housing. Tags: , , .

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