Local advocates warn struggling homeowners
Karen Rivedal/Wisconsin State Journal
10 February 2012
Dane County advocates for struggling homeowners this week generally welcomed the national $25 billion settlement with five of the nation's biggest mortgage lenders over foreclosure abuses like robo-signing.
And they hoped the money -- of which Wisconsin is due $140 million -- will be helpful for expanded future programming to help more residents save their homes from foreclosure.
But they were skeptical about how much good it would do for individuals, warning homeowners not to believe it will solve all their problems.
"It is big news, but it's not the be-all and the end-all," said Kate Nardi Sullivan, a homeownership coordinator for the Dane County Housing Authority who has also counseled many residents facing foreclosure.
Under the settlement, people who lost their homes between January 2008 and Dec. 31, 2011, will get $2,000 each, if they can show there were any mistakes or fraud in the foreclosure process.
In addition, homeowners who are current on their mortgages but owe more than their homes are worth may get refinancing deals, while other borrowers -- including some who are delinquent on their payments -- may be eligible for principal writedowns.
States themselves also will receive money to fund foreclosure prevention programs and other services.
The deal involves mortgages owned by Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial.
But in some ways, the settlement may not be all it's cracked up to be, advocates said.
"It may be too-little, too-late," Sullivan said. "If the Big 5 (banks) could have gotten their acts together a little bit sooner, people wouldn't be in such dire straits. And $2,000 doesn't go very far to someone who's been foreclosed on."
Similarly, UW-Madison Professor Morris Davis, academic director of the university's Graaskamp Center for Real Estate, said he didn't believe the settlement would help most people who are "deeply underwater" on their mortgages avoid foreclosure.
"But (the aid) could encourage some families that are only marginally underwater to postpone the foreclosure process as long as possible," he said.
Ellen Bernards, a community financial educator at GreenPath Debt Solutions, warned residents facing foreclosure not to assume they will see any financial benefit from the settlement, be it through a payout, a principal reduction or a needed refinancing.
"We'll see, as far as exactly how this impacts each homeowner," she said. "One of the things I don't want homeowners to do is to stop whatever it is they're doing to deal with their situation. I don't want them to assume this will be a panacea."
Bernards also co-chairs the Dane County Foreclosure Prevention Taskforce, a coalition of government agencies, nonprofits and other partners that work to keep residents in their homes.
The taskforce helps sponsor informational workshops, legal clinics and courtroom mediation, all offered at no cost to residents, and Bernards encouraged struggling homeowners to continue using those resources. (See the attached PDF for more info on all the taskforce's programs, including contact information for each one.)
"They still need to meet with a housing counselor," Bernards said of struggling homeowners. "They still need to do a workshop and they still need to file answers to their foreclosure lawsuits if they've been served with notices. They should not assume that some of those billions of dollars are going to come directly to them. They don't know that."
Bernards said she was encouraged by the settlement's promise of aid to states to be used to support existing programming to help keep people in their homes. Many non-profits, Bernards noted, have been forced to eliminate housing counselors because of federal budget cuts.
"The timing is really wonderful, to be able to continue the mediation program and other sources of help," she said, noting new foreclosure filings in January in Dane County rose again, indicating trouble ahead for more homeowners.
"The numbers for January are up," she said. "We're not done. We're just not done."
Sullivan said how helpful the settlement's payouts and new mortgage servicing reforms will be depends on the kind of eligibility criteria that are set up and how closely banks are monitored going forward.
"It really boils down to how it's enforced and how it's administrated at the local level," she said, noting it was easy to be skeptical after the federal government's largely poor record of helping homeowners through previous programs.
"That's true especially for folks who've been in the trenches like myself, and for families who have seen things so bad that you really cannot believe it, in terms of process and things getting hung up and bureaucracy," Sullivan said.
Borrowers should contact their mortgage servicers to get more information about specific loan programs and whether they qualify for help under the settlement, Wisconsin Attorney General J.B. Van Hollen's office advises.
More information, including a list of Frequently Asked Questions, is available at the state DOJ website at www.doj.state.wi.us.
Customers also can call banks at:
Bank of America: 1-877-488-7814
J.P. Morgan Chase: 1-866-372-6901
Wells Fargo: 1-800-288-3212
Other online resources include: