Mass. Mortgage Settlement A 'Good Start' Despite Limited Reach

Some Massachusetts homeowners may now begin applying for financial relief under a settlement between state attorneys general and the nation’s five largest mortgage lenders. Under the agreement, existing and former Massachusetts homeowners are supposed to split up $318 million. But most homeowners won’t get anything.

Let’s be clear about one thing: this deal affects only those mortgages that are wholly owned by those five banks: Wells Fargo, JP Morgan Chase, Citi, GMAC and Bank of America. It does not cover the ones that are backed by the quasi-government agencies Fannie Mae and Freddie Mac, and that’s most mortgages.

Most of the money –- about two-thirds — is meant for people who have those specific mortgages and are behind on their payments or are in foreclosure now.

"Isn’t it ironic that actually the lenders are doing much more than the government?" said Bruce Marks, who runs NACA, a housing nonprofit based in Jamaica Plain. He had wanted the settlement to include all mortgages. But Attorney General Martha Coakley is calling this narrower deal a good one.

"Rather than wait for two more years, we wanted to get started on this. And we’re hopeful that it will provide real relief," Coakley said.

So what is that real relief? Most of the money — about two-thirds — is meant for people who have those specific mortgages and are behind on their payments or are in foreclosure now. Their monthly bills would be modified, which Coakley said will keep many from going over the edge.

"There’s gonna be foreclosures still. Don’t make any mistake about that," she said. "What we’re looking for is avoiding unnecessary foreclosures."

A smaller portion of the settlement is supposed to go to people who are making their payments but still owe more than their houses are worth. They would refinance at a lower value.

The smallest share of the settlement goes to people who have already lost their homes. Because robo-signing or other improper paperwork may have been behind their foreclosures, those folks will get somewhere between $1,500 and $2,000.

"That’s not a month’s rent in this state right now!" said John O’Brien, from the Essex County Register of Deeds. He thinks banks are paying a very small price for the attorney general to drop her lawsuit against them.

"We’ve kind of set a new price for forgeries and fabricated documents: $2,000!"

But Coakley disagrees. She said she still plans to go after a mortgage servicing agency used by those same banks. And she hopes this deal puts more pressure on Fannie Mae and Freddie Mac to modify the loans they hold as well.