Attorney General Coakley Gets it Right on the National Mortgage Settlement
On February 9, 2012, the Federal Government and Attorneys General from 49 States reached an agreement with the five largest mortgage servicers for $25 billion in payments to resolve violations of state and federal law and to implement comprehensive new mortgage loan servicing standards. The five servicers are Ally Financial, Inc. (formerly GMAC), Bank of America, Citigroup, JP Morgan Chase, and Wells Fargo.
After much deliberation, Massachusetts Attorney General Martha Coakley decided to join the national settlement, so the Commonwealth will receive its $46.5 million share of payments to the states to be distributed by the States’ attorney generals to “foreclosure relief and housing programs, including housing counseling, legal assistance, foreclosure prevention hotlines, foreclosure mediation, and community blight remediation.”
Here’s why the Attorney General’s decision to join the national settlement is, on balance, a good decision for Massachusetts:
The foreclosure crisis shows no signs of abating. Foreclosure petitions were 67 percent higher in September than they were in May. The Massachusetts Housing Partnership’s Foreclosure Monitor's assessment of real estate data and economic trends indicates that foreclosures in Massachusetts will increase, there are still thousands of properties in the foreclosure pipeline, and we will not likely see a full real estate recovery until 2014 or later. In this context, getting help to homeowners now is vital.
Resources to address the foreclosure crisis are drying up. In response to the crisis, Massachusetts has made resources available for foreclosure prevention and for the redevelopment of foreclosed properties. The MA Division of Banks continues to make annual awards for foreclosure prevention counseling under Chapter 206 of the 2007 law that MACDC was instrumental in passing. However, as the mortgage licensing fees that fund these grants have declined, so have the awards: from $2 million in 2008 to $1 million in 2011. The primary funding source for redeveloping foreclosed properties, the federal Neighborhood Stabilization (NSP) Program, which has been used to purchase and rehabilitate over 1,300 units statewide, is completely spent. We need the resources generated by this settlement and we need them now.
Massachusetts is more likely to gain from the national settlement than from going it alone. Under the national settlement, in addition to the $46.5 million going directly to the state for various programs, Massachusetts homeowners will receive $224 million in loan modifications and other direct relief and $32.7 million in refinancing of underwater homes. Borrowers who lost their homes and suffered servicer abuse will gain $14.7 million. Furthermore, the five banks agreed to implement unprecedented changes in how they service mortgage loans, handle foreclosure, and ensure the accuracy of information. Not everyone likes the Agreement; some take the attorneys general to task for not holding out for a better settlement. It’s true that Attorney General Coakley could have conceivably obtained more resources for MA by declining to join the national settlement, but this is by no means certain, and what is certain is that the resources would be longer in coming. Plus, this settlement does not preclude federal and state pursuit of further criminal enforcement actions. Given the options and uncertainties, I believe that the Attorney General made the right decision for Massachusetts.
To ensure that the resources best address the foreclosure crisis in Massachusetts, MACDC and its allies need to engage, advocate and negotiate with the Attorney General on behalf of the families and communities most impacted by the ongoing crisis. We need to be aggressive in speaking out about the uses for the $46.5 million, when the money flows, and how it is spent. Our task is just beginning.