Utah takes $171M in national mortgage settlement

Feb 9 2012 - 5:08pm

SALT LAKE CITY -- The money Utah will receive from a national settlement with big mortgage lenders might not be enough to pay every homeowner entitled to receive a share, state lawyers said Thursday.

Utah will receive an estimated $171 million from the lenders, but officials can't say if that will be enough. Consumer groups say only about 10 percent of struggling homeowners or victims of foreclosure abuse will benefit from the landmark national settlement.

Utah Attorney General Mark Shurtleff said about $102 million of Utah's share will be available to reduce or modify loans for households at risk of foreclosure.

Nearly a quarter of Utah's homeowners are "underwater," meaning they owe more on their mortgage than their house is worth, he said. But it wasn't known if the relief is enough to cover all of those households.

"It depends how far the $102 million goes," said Shurtleff's chief deputy, John Swallow.

Another $45 million is available for Utah residents who lost their homes to foreclosure. They'll get $2,000, no questions asked.

The state will get another $23 million for the Legislature to spend as it sees fit.

Swallow said some benefits of the settlement go beyond dollars.

"It will reduce the number of foreclosures and prop up values of surrounding homes in a neighborhood. It really is a lifeline to a whole neighborhood or community," Swallow said.

The settlement applies to borrowers who who were improperly foreclosed upon from 2008 through 2011 by Bank of America Corp., Wells Fargo & Co., JPMorgan Chase & Co., Citigroup Inc. and Ally Financial Inc.

Distressed homeowners who got their mortgage from another lender are out of luck, but Swallow said Utah is pushing other lenders to offer their own forms of relief.

"We're still working on negotiations with other banks. We hope this is the first step toward a resolution with other lenders," he said.

Homeowners looking for a loan reduction or refinancing still have to deal with the major banks, but Swallow said third-party mediators will provide some "muscle" for them in negotiations, while state lawyers can jump in to help enforce the settlement.

"This is the second largest settlement ever by the states and addresses serious misconduct against homeowners in Utah and other states," Shurtleff said in a statement. "This agreement provides relief to homeowners and also stops the outrageous conduct that led to the mortgage crisis."

The settlement doesn't cover so-called induced foreclosures, Swallow said.

That occurred when some banks advised homeowners to stop making mortgage payments pending a promised refinancing that never materialized, leaving them vulnerable to foreclosure, he said.

 

 

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