By Paul Tuthill
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Springfield, MA – Help is on the way for some of the people facing the loss of their home through foreclosure. But housing advocates say the $25 billion dollar national settlement with mortgage lenders over abusive practices is just a good first step. WAMC's Paul Tuthill reports.
David Dunwell says his Springfield Massachusetts home went to foreclosure after he was put out of work during the recession, could not make his mortgage payments, nor sell the house which he said is worth half the 220 thousand dollars he paid for it. Dunwell was unimpressed by the settlement attorneys general in 49 states reached last week with five big banks.
Officials say the settlement will help as many as one million homeowners facing foreclosure by either modifying the terms of their present loans or by refinancing. But there are six million homes currently in foreclosure and another 11 million that are underwater..the owners owe more on the mortgage than the property is worth. For people like Dunwell, who've already lost their homes to foreclosure, there could be cash payments..of $2 thousand.
For people to qualify for help their mortgage had to originate with or be serviced by one of the five major banks that are party to the settlement..Bank of America, JP Morgan Chase, Wells Fargo, Citigroup and Ally Financial. Fannie Mae and Freddie Mac, which hold a majority of the country's home mortgages, were not part of the deal. Also its expected to take up to a year to identify eligible homeowners. The banks have three years to provide the promised help.
Malcolm Chu, an organizer with Springfield No One Leaves, a housing advocacy organization, says the settlement , despite its shortcomings, is a breakthrough of sorts when it comes to banks willing to help homeowners who are underwater.
In addition to the money the banks are to put toward modifying loan terms and refinancing, each state is to receive a direct payment $46 million dollars for Massachusetts. Peter Gagliardi, executive director of HAP housing , says that money could be used to counsel struggling homeowners on their options, or to buy up foreclosed vacant houses that are a blight on neighborhoods.
While the settlement was intended to help ease the foreclosure crisis, there are concerns it could aggravate it. Banks, now freed from under a legal cloud over the conduct of their foreclosure business may begin to move aggressively against delinquent homeowners .
Massachusetts Attorney General Martha Coakley , who had filed a suit against the banks in December agreed to the national settlement because her office can still pursue issues specific to Massachusetts law
Massachusetts authorities allege lenders in some cases initiated foreclosures without actually holding the mortgages. Coakley also claims the state's land recording system was corrupted by the shoddy record keeping of a mortgage registry database set up by the banks.