DENVER - Help is on the way for people who lost their homes in foreclosure or those who are still under water in their mortgage.
Attorney General John Suthers announced Colorado's portion of the biggest, joint state-federal settlement in history on Thursday. Out of the $25 billion agreement, Colorado will get $204.6 million. The money will be split in the following ways:
- $73.3 million for principal reductions on loans to make modifications possible. About 40 percent of the funds will also be set aside to help ease the effects of foreclosure, including waiving deficiency balances, enhanced cash-for-keys payments and blight prevention.
- $52.5 million in cash to the state. The attorney general and the governor's office will get together and take public comment to decide on the best use for the money. There are several ideas including a possibility to offer low-interest loans through the Colorado Housing Authority.
- $46.3 million worth of refinancing benefits to under water borrowers. The attorney general says this will allow some people who may not have previously qualified to do so under the settlement.
- $32.49 million in payment to homeowners who lost their homes to foreclosure between Jan. 1, 2008 and Dec. 31, 2011 and experienced fraudulent or abusive servicing practices such as robo-signing or dual tracking. People who qualify will receive up to $2,000 in restitution.
Attorneys general from all 50 states, state banking regulators and nearly a dozen federal agencies reached the settlement after a massive investigation into the nation's five largest mortgage servicers - Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial - showed fraudulent and abusive practices in mortgage loan servicing.
"This was being done very sloppily. People were being dual-tracked. People were being told they were eligible for modification when the other side of the bank was going ahead with foreclosure and things like that," Suthers said.
Some critics have asserted the settlement is an achievement, however, the $2,000 in restitution can do little to ease the pain many homeowners dealt with in the face of foreclosure and the market has suffered greatly over the past four years.
Suthers says this settlement was the best way to go because litigation at the state level could have taken up to five more years and because of murky federal regulations and different consumer protection in every state, any suit would have been much more messy with much less benefit.
"This is not going to fix all the housing problems and no one should suggest that it should," Suthers said. "People that have been foreclosed on in the last couple of years - if they were really under water and lost their homes - just because they had robo-signing, doesn't mean they're going to get their house back or they're going to get what their house is worth. It is assistance that otherwise wouldn't have been available."
Although Suthers reiterated the settlement is not a cure all, he says it will go a long way in helping to bring back balance to the real estate market.
"It can help stabilize the market as we go forward here," he said.
Most homeowners will be notified by one of the five banks if they are eligible for some form of relief.
For more information, log onto the Colorado Attorney General's Office settlement consumer guide: http://www.coloradoattorneygeneral.gov/departments/consumer_protection/mortgage_fraud_information_center/consumer_guide_multistate_foreclos.
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