State grabs $7.7M of foreclosure settlement
by Ted Carter
Published: May 27,2012
Tags: Bank of America, Chase, Citi, GMAC, Jim Hood, Mississippi Center for Legal Services, Mississippi Center of Justice, Mississippi Home Corporation, money management, mortgage settlements, North Mississippi Rural Services, Wells Fargo
Mississippi’s general fund will receive a $7.7 cash infusion from the national legal settlement state Attorney General Jim Hood and 48 other attorneys general negotiated with giant mortgage servicers Bank of America, Citi, Chase, GMAC and Wells Fargo.
The financial companies were forced into the settlement after widespread fraud and abuse was discovered in their mortgage foreclosures practices, including “robo-signings” by which untrained employees signed foreclosure documents without ensuring their companies even owned the mortgages.
Mississippi’s discretionary portion of the settlement comes to $13.5 million. State legislators could have kept the whole allocation to plug budget holes but agreed to allocate $5.8 million to help homeowners avoid foreclosure, including counseling and education programs and creation of a foreclosure hotline.
Here’s a rundown on the distribution of the remaining money:
>> $1,920,000 to the Mississippi Center of Justice, North Mississippi Rural Legal Services and the Mississippi Center for Legal Services for the creation of a Foreclosure Legal Assistance Project;
>> $944,343 to Money Management for the creation of a Homeowner Hotline, toll-free hotline that would serve as an initial point of contact for distressed homeowners who are seeking to qualify for assistance;
>> $2,144,065 to the Mississippi Home Corporation for 10 housing counselors statewide, pre-purchase education and individual one-on-one housing counseling, budget planning around home purchase decision, and media advertising;
>> $500,000 to the Mississippi Veteran’s Home Purchasing Board/Military Relief Fund for veterans housing assistance programs; and
>> $381, 927 to the Office of the Attorney General to administer and audit the monthly reimbursement requests over a three-year period.
The $5.8 million is to be spent over a three-year period. Any money not spent by then must be returned to the general fund, according to the Attorney General’s office.
The Mississippi Center of Justice and the North Mississippi Rural Legal Services said it is not prepared to discuss what it hopes to accomplish with the $1.9 million Foreclosure Legal Assistance Project or how it intends to structure it.
“We’re still working out the details of what the programs will look like,” said Sharon Garrison, spokeswoman for the Mississippi Center of Justice.
Ben Thomas Cole, director of North Mississippi Rural Legal Services, said a framework for the Foreclosure Legal Assistance Project has not been decided. “We’re not at liberty at this point to publicize the discussions we’re having with the Attorney General’s office,” he said.
Scott Spivey, spokesman for the Mississippi Home Corporation, said the $2.1 million allocation the agency is to receive will go to hire 10 counselors to advise on a range of topics.
Many of those served by the counselors will be people caught up in foreclosures and in need of help repairing their credit. Other clients will be people who need to learn more about home buying and mortgages before purchasing a home, he said.
“The thought behind that is that a better educated buying public makes better decisions,” added Spivey, whose organization was created in 1989 as the state’s housing agency and helps to provide affordable housing across Mississippi.
Still other clients will be counseled on what the national settlement with the mortgage servicers constitutes and what relief the settlement may provide in specific instances, Spivey said.
Kathleen Day, spokeswoman for the Washington, D.C.-based Center for Responsible Lending, said Mississippi homeowners are fortunate the state is not following the lead off states such as Georgia and California, where state leaders have diverted the entire amounts of the discretionary settlement money for non-foreclosure related purposes.
“Gosh knows it’s not much but at least it’s something,” Day said of the Mississippi allocation.
Nationally, the settlement comes to $25 billion of which $20 billion is to go to financial relief for mortgage borrowers. At least $10 billion of the money is to be used as credits for principal reduction in loan modifications.
The settlement does not take the mortgage servicers entirely off the hook. It releases claims by state attorneys general and some bank regulators that relate to servicing practices, robo-signings, foreclosure processing and origination practices.
It also releases federal civil claims based on serving of mortgage loans, originating mortgage loans and servicing of loans of borrowers in bankruptcy. The settlement does not, however, release claims of individual borrowers. Nor does it release criminal claims, securitization claims or other governmental claims.
The settlement also specifies servicing reforms designed to end sloppy and fraudulent practices, and will give more homeowners a chance to restructure or refinance out of unaffordable loans on which the debt owed is higher than the value of the property on which the debt is based.
Reforms are also intended to reduce dual-tracking, a practice by which banks pursue foreclosure at the same time the homeowner is trying to modify the loan.
It’s far from a perfect settlement, said Day of the Center for Responsible Lending. “But it’s a good settlement and there is money going back to people.”
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