Newton County homeowners who have their mortgage with Bank of America, JPMorgan Chase, Wells Fargo, Citigroup or Ally Financial could receive some financial assistance in the coming months.
The attorneys general of 49 states, including Georgia, reached a $25 billion settlement with the nation's five largest mortgage lenders this week to over relief for victims of foreclosure abuses. The settlement does not include Fannie Mae and Freddie Mac, which own half of all U.S. mortgages, roughly 30 million loans. Government officials are still negotiating with 14 other lenders to join the settlement.
Georgia will get $814.7 million, including $82.7 million for people who have already lost their home to foreclosure, $101.8 million to refinance loans to some underwater borrowers, $526 million to benefit loan term modifications and $104 million to be used to prevent foreclosures and prosecute financial fraud.
The number of local residents who have mortgages with the five major lender isn't readily available, but bank-owned properties and foreclosure notices indicate at least four of the banks have significant presences.
According to the Newton County Tax Assessor's website, Wells Fargo owns 35 properties, Bank of America owns 24, JPMorgan Chase and affiliated banks own 11 and Citibank-affiliated banks own 8. Those four banks are also frequently seen in the latest foreclosure notices. Ally Financial is not seen in either place.
It will take time to determine who will be helped by the complex settlement, but people can keep track of details at nationalmortgagesettlement.com. Details of the settlement can also be found on Georgia's Attorney General's website at law.ga.gov.
The deal requires the banks to reduce loans for about 1 million households that are at risk of foreclosure. The lenders will also send $2,000 each to about 750,000 Americans who were improperly foreclosed upon from 2008 through 2011. The banks will have three years to fulfill terms of the deal.
About 11 million households are underwater, meaning they owe more than their homes are worth.
John Bartholomew, staff attorney for Atlanta Legal Aid's Home Defense Program, told The News Friday that existing loans are expected to be modified by about $20,000 per loan. At that rate, around 25,000 Georgians could be helped.
The settlement provides $104 million directly to the state, which could use money to help with payment assistance, refinancing and neighborhood improvement and stabilization, Bartholomew said.
The states have agreed not to pursue civil charges over the abuses covered by the settlement. Homeowners can still sue lenders on their own, and federal and state authorities can still pursue criminal charges.
The deal, reached after 16 months of contentious negotiations, is subject to approval by a federal judge. It's the biggest settlement involving a single industry since the $206 billion multistate tobacco deal in 1998.
For the banks, the settlement comes mainly as a relief. If each state had sued the lenders and won, the total settlements could have run into the hundreds of billions. And all the lenders have set aside adequate reserves.
"It's really a wash," said Paul Miller, bank analyst at FBR Capital Markets. "A billion dollars is nothing for these large trillion-dollar banks."
The bulk of the settlement will go toward reducing underwater mortgages and refinancing some of them. But the banks had realized they weren't going to collect the loans and had already written down their value, Miller noted.
The deal requires banks to make foreclosure their last resort. And they can't foreclose on a homeowner who is being considered for a loan modification.
Still, the settlement has critics and the federal government has a dubious track record of enforcing such rules. The Obama administration's signature foreclosure-prevention program has failed to help more than half of those who have applied to have their mortgage payments lowered permanently. Many have complained that the program is a bureaucratic nightmare.
The Associated Press contributed to this article.