California Earns $18 Billion Share of Nationwide Mortgage Settlement
California Attorney General Kamala D. Harris has announced an historic commitment to California of up to $18 billion that will benefit hundreds of thousands of homeowners in the state hardest hit by the mortgage crisis. California secured the $18 billion agreement as part of a national multistate settlement to penalize robo-signing and other bank servicing and foreclosure misconduct. The agreement comes after California departed from the multistate negotiations last September when the estimated relief to California was $4 billion. Attorney General Harris insisted on more relief for the most distressed homeowners, meaningful enforcement, and the ability of California and other states to pursue investigations into misconduct. "California families will finally see substantial relief after experiencing so much pain from the mortgage crisis," said AG Harris. "Hundreds of thousands of homeowners will directly benefit from this California commitment." California's participation in the settlement also increased the amount of relief other states will receive by approximately $6 billion. Attorney General Harris also obtained separate, enforceable guarantees to ensure that banks will be accountable for their commitments to California. As part of the separate California guarantee, banks must enact a minimum of $12 billion in principal reductions for California homeowners. Failure to achieve this minimum level of reductions will result in substantial cash payments of up to $800 million that the banks will have to pay to the state. Unlike the larger multistate agreement, which is enforceable in a federal court in Washington, D.C., this payment provision empowers the Attorney General to summon the banks to California state court. "This outcome is the result of an insistence that California receive a fair deal commensurate with the harm done here," said AG Harris. "We insisted on homeowner relief for Californians and demanded enforceability so homeowners actually see a benefit that will allow them to stay in their homes, and preserved our ability to investigate banker crime and predatory lending." California's separate guarantee also creates important incentives to ensure that banks will reduce the principal mortgage balance of underwater homeowners in California's hardest-hit counties and that the principal reductions in these communities will occur within the first year of the settlement. To speed investigations and strengthen prosecutions of these mortgage cases, California will expand its Mortgage Fraud Strike Force, adding to the more than 42 members already working on the team. The state will continue its investigative alliance with Nevada, that allows the sharing of resources, information and strategies, and will look to collaborate with additional states focused on a law enforcement response to the wave of mortgage fraud. The national multistate agreement and California commitment will provide substantial relief for thousands of Californians whose mortgages are owned by the five banks in the settlement, but thousands more will still need help as they struggle to stay in their homes. "I will continue to fight for principal reductions for the approximately 60 percent of California homeowners whose loans are owned by Fannie Mae and Freddie Mac," said AG Harris. "This is an historic amount of relief for California homeowners, but it is one piece of a broader focus. We will continue our crackdown on mortgage fraud and quickly move to pass legislation that will simplify, reform and upgrade our broken mortgage system." Harris will propose a comprehensive legislative agenda to protect homeowners in the mortgage market. This legislation will build on the three-year reforms agreed to as part of the California commitment, including a single point of contact for mortgage-holders and an end to the unfair and confusing system of dual-track foreclosures. The financial benefits of this historic agreement extend to homeowners whose loans are owned or serviced by one of the five largest mortgage lenders. Benefits include: ►More than $12 billion is guaranteed to reduce the principal on loans or offer short sales to approximately 250,000 California homeowners who are underwater on their loans and behind or almost behind in their payments. ►$849 million is estimated to be dedicated to refinancing the loans of 28,000 homeowners who are current on their payments but underwater on their loans. ►$279 million will be dedicated to offering restitution to approximately 140,000 California homeowners who were foreclosed upon between 2008 and Dec. 31, 2011. ►$1.1 billion is estimated to be distributed to homeowners for unemployed payment forbearance and transition assistance as well as to communities to repair the blight and devastation left by waves of foreclosures, targeted at 16,000 recent foreclosures. ►$3.5 billion will be dedicated to relieving 32,000 homeowners of unpaid balances remaining when their homes are foreclosed. ►$430 million in costs, fees and penalty payments. County-specific payments are based on the number of homeowners and the depth of the foreclosure crisis. It is estimated that homeowners in the following counties will accrue the following level of benefits over the three-year life of the commitment: Los Angeles will receive $3.92 billion; Riverside, Calif. will receive $1.59 billion; San Bernardino, Calif. will receive $1.13; Sacramento, Calif. will receive $820 million; and Stanislaus County, Calif. will receive $368 million.