SALT LAKE CITY — Beleaguered Utah homeowners hit hard by the mortgage foreclosure crisis may finally get some relief. The governor and state attorney general announced Thursday that Utah is joining 48 other states in a $25 billion federal settlement with the nation's five largest mortgage lenders over foreclosure abuses, fraud and unethical mortgage servicing practices.
Under the proposed agreement Utah would receive nearly $23 million in direct payments and $171,115, 273 in total benefits. The total includes $45 million in direct relief to Utah homeowners and $102 million of indirect relief to address future mortgage loan servicing practices.
Qualifying homeowners could receive $2,000 and may also be eligible for one of several loan modifications, refinance or mortgage write down options, including principal reduction, loan extensions or "cash for keys" — offering a cash buyout for heavily indebted clients who relinquish ownership.
"This agreement provides relief to homeowners and also stops the outrageous conduct that led to the mortgage crisis," Utah Attorney General Mark Shurtleff said.
Homeowners also receive comprehensive new protections from new mortgage loan servicing and foreclosure standards, he said. Additionally, an independent monitor will ensure mortgage servicer compliance.
Utah lawmakers Thursday were already considering how to use the unexpected $23 million upfront cash windfall.
House Speaker Becky Lockhart, R-Provo, said while lawmakers don’t believe the settlement dollars come with strings attached, they do feel an obligation to use at least some of the money to help prevent future foreclosures.
“We are sensitive to that. I think we’ll look very seriously at those kinds of issues,” she said.
But she said there is also the possibility some of the cash could be used to replenish the state’s Rainy Day Fund and other sources tapped in recent years to balance the budget.
Senate President Michael Waddoups, R-Taylorsville, said he's waiting for the money to arrive before making plans to spend it. There have been times when Federal dollars were promised but didn't show up, he said.
Should it arrive before the Legislature adjourns, "I suspect there will some pressures to allocate some this session," Waddoups said.
The landmark agreement was negotiated in conjunction with the U.S. Justice Department, U.S. Housing and Urban Development, and a bipartisan group of state attorneys general with the country's largest mortgage lenders including, Bank of America, Citi, JP Morgan Chase, GMAC and Wells Fargo. The five lenders account for about 60 percent of all mortgages in the nation, Shurtleff said.
A secondary settlement with nine other lenders is expected sometime in the future, he said.
The agreement applies to Utah borrowers who lost their homes to foreclosure from Jan. 1, 2008 through Dec. 31, 2011 and suffered servicing abuse. Approximately 23 percent of Utah mortgages are currently underwater.
Salt Lake City homeowner Odette Dunn said the announcement of the settlement is welcome news for her family, who could benefit if they qualify for relief from their lender under the agreement.
In March 2009, her husband lost his job, putting the family of nine in financially dire straits. She said after months of wrangling, they were eventually able to work out a loan modification with mortgage holder Bank of America and keep her home.
Now, in the wake of the settlement, she wonders if her lender treated her family fairly. She said she is glad the bank's misdeeds were finally revealed and some homeowners will be helped.
"The banks have to be held accountable," Dunn said. "Too many people lost their homes."
The joint state-federal settlement is the result of a multi-agency civil law enforcement investigation and initiative that included state banking regulators across the country.
The settlement holds banks accountable for past mortgage servicing and foreclosure fraud and abuses and provides relief to homeowners, Gov. Gary Herbert said.
"We hope those affected by the foreclosure crisis will take advantage of the programs and resources available through this settlement," Herbert said.
The settlement does not grant any immunity from criminal offenses and will not affect criminal prosecutions. The agreement does not prevent homeowners or investors from pursuing individual, institutional or class action civil cases against the five servicers. The pact also enables state attorneys general and federal agencies to investigate and pursue other aspects of the mortgage crisis, including securities cases.
"This agreement addresses some breakdowns in the mortgage servicing industry but still allows us to go after other misdeeds," says chief deputy Utah Attorney General John Swallow. "Significantly, those who are still underwater in their homes could be eligible for principal reductions and loan modifications that would not otherwise be available had we gone to trial."
In some cases participating mortgage servicers will contact borrowers directly regarding loan modification options, said Asst. Utah Attorney General Wade Farraway.
However, borrowers should contact their mortgage servicer to obtain more information about specific loan modification programs to determine if they qualify under terms of this settlement, he said.
More information on the proposed settlement is available at:
Bank of America: 1-877-488-7814
Wells Fargo: 1-800-288-3212
For housing/mortgage counseling resources in Utah: 211