Bay Area homeowners who were victims of mortgage fraud could see relief soon thanks to a $25 billion agreement reached between the nation's five largest lenders, the federal government and 49 state attorneys general.
The joint agreement, which aims to address mortgage loan servicing and foreclosure abuses, is the largest federal-state civil settlement ever reached, according to the U.S. Department of Justice.
California Attorney General Kamala Harris said yesterday that California will receive up to $18 billion as part of the settlement to penalize robo-signing, or the practice of signing large numbers of documents without verifying their information, and other bank servicing and foreclosure misconduct.
"California families will finally see substantial relief after experiencing so much pain from the mortgage crisis," Harris said in a statement.
"Hundreds of thousands of homeowners will directly benefit from this California commitment." County-specific payments will be "based on the number of homeowners and the depth of the foreclosure crisis," according to Harris' office.
More than two dozen members of the California Democratic Congressional Delegation -- including 10 representatives from the Bay Area -- issued a joint statement responding to the settlement emphasizing that more needs to be done to provide relief to Californians. "The settlement announced today is a step forward ... however, as President Obama, Attorney General Harris and others have noted, this is not a complete solution to the foreclosure crisis in California."
According to the statement, Fannie Mae and Freddie Mac hold 60 percent of California mortgages, meaning only a minority of California homeowners are eligible for the relief outlined in the agreement. The representatives said they have "consistently called" for Edward DeMarco -- the acting director of the Federal Housing Finance Agency, which regulates both government-sponsored enterprises -- to offer principal reductions of loans held by the enterprises.
"The Federal Reserve and leading economists agree that principal reductions offer the best hope for stabilizing the housing market and minimizing creditor losses from foreclosures," the representatives' statement said. The group Alliance of Californians for Community Empowerment, or ACCE, which has staged anti-foreclosure events around the Bay Area, also said today that the foreclosure deal is only a first step in improving the conditions for homeowners.
"This settlement is a down payment on the debt owed to homeowners and communities by the Wall Street gamblers that crashed our economy," ACCE member Vivian Richardson said.
"It will bring relief to some of the victims of the fraud and abuse of Wall Street, but there is much more that needs to be done."
Dave Lagstein, a lead organizer for ACCE, said that the next steps to provide relief to homeowners involve drafting state-level legislation to ensure due process in any future foreclosures and to "slow down the tide of foreclosures."
Lagstein said that ACCE is also advocating for principal reductions of Fannie Mae- and Freddie Mac-held mortgages, because "the critical way to get relief, both for homeowners and to invest in the economy, is to have principal reduction."
The group plans to work with the ReFund California Coalition and Harris to push for "real implementation and enforcement" of the settlement. The agreement was reached with Bank of America Corp., Wells Fargo & Co., JPMorgan Chase & Co., Citigroup Inc. and Ally Financial Inc.
Oklahoma was the only state that didn't participate in the agreement and will not receive financial assistance. The banks will put forth the billions of dollars to provide refinancing for borrowers in high-interest-rate mortgages, and reduce principal amounts for families who owe more than their homes are worth, among other relief.
Wells Fargo Home Mortgage President Mike Heid, in a statement issued this morning, said the San Francisco-based lender "has actively participated in the discussions leading to this agreement, which builds on the significant refinance and customer relief efforts we already have undertaken."
President Obama, in remarks made this morning, said the settlement will "begin to turn the page on an era of recklessness that has left so much damage in its wake."
The housing bubble and ensuing economic downturn resulted in more than 4 million families losing their homes to foreclosure, the president said. The agreement not only provides some relief but also establishes "significant new homeowner protections," according to the Department of Justice. The new agreement aims to prevent foreclosure abuses such as robo-signing, improper documentation and lost paperwork.
New servicing standards will also make foreclosure a last resort by requiring loan servicers to evaluate other options and prevent a servicer from foreclosing on a homeowner being considered for a loan modification.
"These practices were plainly irresponsible. And we refused to let them go unanswered," Obama said. "We're going to make sure that the banks live up to their end of the bargain."
--Bay City News
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