Thursday, Feb. 9, 2012 | 7:37 p.m.
At first glance, Nevada’s $1.5 billion settlement with banks over mortgage servicing and foreclosure problems seems like a lot of money.
But for the consumers and their attorneys most affected, the deals announced Thursday are woefully inadequate.
“It’s a slap in the face,” said North Las Vegas resident Nina Griffin, who says her home faces a wrongful foreclosure involving Bank of America subsidiary Countrywide.
It’s wrongful, she says, in that it involves blatant document robosigning fraud and broken promises to her — something she brought to the attention of Nevada’s attorney general and other regulators. So far, she said, they haven’t been of much help.
Griffin, a 51-year-old federal employee, said she was troubled the settlements included a provision calling for banks to pay about $2,000 to each person who lost a home in a foreclosure tainted by robosigning issues and other problems.
That’s a small amount of money considering Griffin has seen her credit ruined and faces continuing struggles to hold on to her home.
Also troubling to Griffin are indications banks may make principal reductions in mortgages in the tens of thousands of dollar range, which won’t help her since her home is valued at $85,000 to $90,000 but is encumbered by a $256,000 mortgage.
Las Vegas attorney Matthew Callister, who regularly sues banks in hopes of helping homeowners trying to stay in their homes, also called the settlements a “slap in the face.”
“It’s not a settlement, it’s a sellout,” said Callister, who believes banks find it more profitable to foreclose than to help homeowners. “It doesn’t help anyone who needs substantial reductions in principal.”
Callister said the need for principal reductions is acute in Nevada, which has seen home prices tumble during the recession. With high levels of unemployment (12.7 percent in Las Vegas currently) and residents in some cases seeing their work hours cut, many Nevadans feel the only way they can stay in their homes is with lower payments that match their lower home values.
CoreLogic, a data provider in Santa Ana, Calif., reports that Nevada homeowners are underwater to the tune of $10.3 billion — that is the $112 billion in residential mortgage debt in the state backs properties worth only about $101 billion.
Nevertheless, government officials who announced the settlements on Thursday made the point that the deals they made with the banks were likely the best they could accomplish given the costs and risks of litigating against them in court.
Under a national settlement valued at $25 to $40 billion with five banks — Ally/GMAC; Bank of America, Citi, JPMorgan Chase and Wells Fargo — and a separate Nevada settlement with Bank of America, Nevada expects to receive some $1.5 billion in benefits.
These include Bank of America setting aside $750 million for principal reduction and short sales — part of $1.3 billion in benefits from all five banks for loan modifications and other relief.
Nevada borrowers who suffered loan servicing abuse and lost their homes to foreclosure will qualify for $57 million in cash payments to borrowers, the attorney general’s office said.
“We are continuing our criminal prosecutions and civil investigations of the foreclosure crisis. After careful deliberation, and negotiation with our federal partners and banks, and critical feedback from Nevadans including constituents, elected officials, and community leaders, I decided it was in the state’s best interest to opt into the national foreclosure settlement,” Nevada Attorney General Catherine Cortez Masto said in a statement. “This settlement represents a step in the right direction. Nevada did well.”
The settlements do not prohibit Nevada from continuing to pursue criminal actions against the banks, she said.
“The agreement does not prevent homeowners or investors from pursuing individual, institutional or class action civil cases against the five (loan) servicers. The pact also enables state attorneys general and federal agencies to investigate and pursue other aspects of the mortgage crisis, including securities cases,” the attorney general’s office said.
Masto said the separate settlement with Bank of America includes new servicing standards that “stop many past foreclosure abuses including improper documentation and lost paperwork through new mortgage servicing standards, requires strict oversight of foreclosure processing, mandates that mortgages servicers will have to evaluate homeowners for other loan mitigation options before foreclosures, restricts banks from foreclosing while the homeowner is being considered for a loan modification and creates a single point of contact for borrowers seeking information about their loans and adequate staff to handle calls.”
In 2010, Masto sued Bank of America, charging it had violated an earlier settlement involving Countrywide because of a poorly-run foreclosure operation in which homeowners were led to believe they would receive loan modifications and then were foreclosed on anyway — charges denied by the bank.
Officials on Thursday said that because of the complexities of the mortgage market, and the three-year-timeline for carrying out the national settlement, borrowers won’t immediately know if they’re eligible for help under the deals.
More details are available by clicking here.
Bank of America, which services and owns mortgages, said in a statement that among the provisions in the national settlement is one aimed at helping underwater homeowners.
“On mortgages that Bank of America owns, the company would expand refinancing opportunities or lower interest rates to provide reduced payments for many homeowners who are current on their payments but owe more than the current value of their homes,” the bank said.