Will The $25 Billion Mortgage Settlement Help Stem The Wave Of Foreclosures?
Since 2005, the number of foreclosures in New Hampshire has increased 700 percent. Last year, more than 3,800 families were forced out of their homes due to foreclosure.
New Hampshire is one of 49 states that signed on to a settlement between the federal government and the country's five largest lenders -- Bank of America, Citi, Wellsfargo, Ally/GMAC, and JP Morgan Chase -- brought for misconduct in lending practices.
The banks are accused of fast tracking foreclosures through improper documentation by so called robo-signing, as well as engaging in another practice called dual tracking. Dual tracking occurs when borrowers are in the process of refinancing and the bank is also working to foreclose on them.
"That's unfair and deceptive," says Senior Assistant Attorney General Thomas Boffetti."The banks were collecting servicing fees and collecting interest payments, and on the other side they were foreclosing on people and kicking them out."
Under the agreement, the five lenders will receive credits towards their large financial penalties for every foreclosure they prevent. In New Hampshire, the attorney general estimates that financially strapped homeowners will receive about $25 million worth of aid from the settlement.
The lenders will also be subject to new comprehensive servicing standards. These will allow borrowers to appeal if they are rejected for a refinance or principle reduction. There will also be a one point of contact from the bank to handle each client who may be eligible for mortgage relief.
A major complaint from borrowers under water who have tried to get the banks to help them refinance is lost documents and a lack of responsiveness.
Jody Vermillion who has been behind on mortgage payments for her house in Londonderry because she got sick and her husband lost his job, says she went back and forth with her bank for a year trying to refinance.
"We tried by sending the documents and they would request the documents we already sent," says Vermillion. "We ended up being denied because they said they didn't receive the documents we sent numerous times. It did not say which documents they needed. It was just a blank statement saying they did not receive the documents."
New Hampshire Banking Commissioner Ronald Wilbur says the new settlement is not a panacea but could signal needed changes to the mortgage industry.
"I think somehow somebody has to bring back accountability," says Wilbur. "This settlement is a wonderful step in addressing a terrible problem, but we need to make sure standards are implemented so we don't find ourselves in this mess again."
A Federal court is expected to approve the agreement as early as this week.