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Ohioans will get share of $25 billion foreclosure settlement
Fund is enough to give each Ohio homeowner in trouble only $1,000
By Jim Weiker
Tens of thousands of struggling Ohioans stand to benefit from a landmark settlement reached yesterday with the nation’s largest lenders.Ohio’s $335 million share of the $25 billion settlement will be used to help residents stay in their homes, demolish thousands of blighted properties and compensate some who lost their homes to foreclosure.
“Although this settlement is of historic proportion, we know it does not solve the mortgage crisis,” Ohio Attorney General Mike DeWine said. “It is a start. It is a first step.”
The deal is the biggest settlement involving a single industry since a 1998 multistate tobacco deal.
Under the agreement between 49 state attorneys general and the lenders — Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial — will modify loans for almost 1 million households. They also will send checks to about 750,000 Americans who were foreclosed upon. The banks will have three years to fulfill the terms of the deal.
The five banks service about 55 percent of U.S. home loans. Federal and state officials are pursuing a similar settlement with nine other lenders, which could bring the value of the deal to more than $40 billion.
Ohio’s share of the settlement will be divided this way:
• $102 million will come in the form of loan modifications to homeowners who are delinquent or in the foreclosure process, possibly allowing them to remain in their homes.
• $90 million will allow homeowners who owe more than their home is worth — so-called “ underwater” mortgages — to refinance or reduce the loan balance.
• $44 million will compensate former homeowners who were foreclosed upon between Jan. 1, 2008, and Dec. 31, 2011. The amount of the payment will depend on the numbers who apply, but it is expected to be between $1,500 and $2,000 per home. Exactly who will qualify for the money has yet to be determined.
• $97 million will come as a direct payment to the state, $75 million of which the attorney general’s office will use to demolish abandoned properties across the state. The money will be distributed in matching grants to communities, although details on disbursement still are being worked out.
“The time has come to shout, ‘Tear down these houses; tear down these buildings!’ ” DeWine said.
The settlement is the result of months of negotiations between the states and the lenders, after several states including Ohio threatened to sue lenders over shoddy foreclosure paperwork.
President Barack Obama and other politicians praised the settlement as an important step to fixing the nation’s housing industry, which is in a six-year slump.
The agreement, said Obama, “will speed relief to the hardest-hit homeowners, end some of the most-abusive practices of the mortgage industry and begin to turn the page on an era of recklessness that has left so much damage in its wake.”
Others were more cautious. They noted that the total value of the agreement addresses a fraction of housing’s problems and that banks already are modifying loans.
“I really don’t see this as being that big a deal,” said Richard Green, director of the University of Southern California’s Lusk Center for Real Estate. “In reality, the total number of dollars is still small compared to the value of the mortgages that are underwater. To some extent, the numbers reflect losses the lenders would have taken anyway.”
About 9 percent of Ohio’s 1.4 million home mortgages are delinquent, and more than 4 percent are in the foreclosure process, leaving almost 200,000 state homeowners in trouble. The $192 million reserved for troubled Ohio homeowners in the settlement amounts to less than $1,000 per homeowner.
“I think this will be beneficial for some, but we don’t see a lot of folks who are just $1,000 behind,” said Stephen Torsell, executive director of Homes on the Hill, which assists troubled West Side homeowners.
“Sometimes, that’s a large gap to fill, with a reduction in income or loss of a job, but any funds will be helpful,” Torsell said.
Just as important, said some, is that the agreement helps clarify mortgage rules moving forward.
The settlement addresses, for example, one of the biggest complaints from homeowners during housing’s meltdown: the difficulty in getting clear answers from the bank.
The deal requires banks to establish a single point of contact between the bank and homeowner.
The agreement also prohibits lenders from foreclosing on a homeowner who is being considered for a modification.
Banking representatives praised the settlement as an important step toward getting housing back on track.
“It’s good that the settlement is finally here, so we can move on,” said Bob Niemi, executive director of the Ohio Mortgage Bankers Association.
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