State's share of mortgage settlement: $648 million
It could take six to nine months for homeowners to find out if they are eligible for the relief, and officials aren't ready to say how many Washington homeowners might benefit.
Seattle Times staff reporter
ResourcesState of Washington: Housing counselor hotline: (877) 894-HOME. Website: http://www.dfi.wa.gov/consumers/homeownership/
National website: www.nationalmortgagesettlement.com
Source: Attorney General of Washington, Seattle Times staff
Washington stands to get $648 million under the $25 billion national settlement with five of the nation's biggest mortgage servicers announced Thursday.
The biggest chunk, $525 million, is aimed at helping those who are financially underwater on their mortgage because their home's value plunged: $455 million will go for reducing the loan principal of homeowners who are delinquent on payments, and $70 million for refinancing the loans of homeowners still current and paying higher-than-market interest rates on their mortgage.
Officials said it would take six to nine months for homeowners to find out if they are eligible for the relief, and wouldn't say how many Washington homeowners might benefit. More details will be posted to a website — nationalmortgagesettlement.com.
The settlement affects only homeowners with mortgages owned by Bank of America, J.P. Morgan Chase, Wells Fargo, Citigroup and Ally Financial — about 20 percent of the U.S. mortgage market.
More than 377,000 homeowners in Washington state owe more on their houses than they're worth. Real-estate experts say between one-quarter to just over 30 percent of mortgage-holders in the state are underwater or close to it.
Washington Attorney General Rob McKenna, one of 49 state attorneys general who signed the settlement, said it provides "unprecedented" relief for distressed homeowners, establishes stronger servicing and foreclosure standards and creates stiff penalties for banks that miss loan-modification targets over the next three years.
"Our settlement holds America's largest banks accountable for harms homeowners suffered from shoddy loan servicing, illegal robo-signing, and faulty foreclosure processing," McKenna said in a statement Thursday.
Advocates for foreclosure prevention, who for at least two years have been calling on banks to reduce what borrowers owe, were encouraged by the deal but still wondering how many homeowners would get the modifications.
"We haven't been able to see the specific terms of the settlement agreement, and we're pretty anxious to have that information so we can answer those calls we're getting already from homeowners," said Lili Sotelo, senior attorney of the foreclosure prevention unit at Northwest Justice Project in Seattle.
Sotelo and other attorneys said they were disappointed by the small award to victims of wrongful foreclosure. Washington will get $24 million out of a $1.5 billion national fund to compensate homeowners who were improperly foreclosed on between 2008 and 2011. The average check: $2,000.
"It's going to cost a lot more than [that] to establish a right to the payment," said Jeff Smyth, a Seattle attorney who won a judgment in 2010 for a wrongful foreclosure.
Even though the settlement doesn't preclude victims of wrongful foreclosure from bringing their own lawsuits against servicers, in reality they can't afford it and few attorneys can take on such long and expensive cases. Smyth said his firm is still owed $900,000 on the 2010 judgment, which the bank has appealed.
Assistant Attorney General David Huey, Washington state's lead negotiator in the settlement talks, said the $2,000 check isn't intended to compensate victims for the loss of their house but rather for violations of their right to due process.
The five servicers face a $1 million penalty for every violation they don't remedy and a $5 million penalty for repeat violations, Huey said. And they're required to use at least 75 percent of the loan-modification money by the second anniversary of the agreement's effective date, with additional penalties if they don't hit the target, he said.
At Thursday's news conference, McKenna said he expects the settlement to help thousands of Washington homeowners obtain loan modifications and refinances. This in turn will prevent foreclosures that drive down real-estate values in neighborhoods and push more homeowners underwater, McKenna said.
"It will help stabilize the residential real-estate market," he said.
Other moneys Washington state will receive under the settlement include:
• $45 million for foreclosure relief programs, including housing counselors, free legal assistance and mediation.
• $5 million to the state Attorney General's office to recoup its costs.
• $5 million in civil penalties, which will go to the state's treasury.
Sanjay Bhatt: 206-464-3103 or email@example.com