Not all 50 states are keen to the deal aimed at providing mortgage loan relief to approximately one million underwater homeowners. Currently 40 states have signed on to the proposal that could provide up to $20,000 in principal mortgage relief but other states continue to hang back.
The deal is between five of the country’s largest banks and federal and state officials that could produce up to $25 billion in mortgage relief for qualified homeowners if all 50 states come to an agreement. This is the largest amount dedicated to housing relief since the housing bubble burst.
States on the fence include California, New York, Nevada and Delaware as many attorneys general continue to review documents, even after the initial deadline past. One source close to discussions surrounding Florida says that the hard hit state has yet to even consider joining the settlement and is looking for a side deal.
Iowa Attorney General Thomas Miller appears optimistic that proceedings will go forward. "The sign-on deadline for the proposed joint state-federal mortgage servicing settlement passed Monday with more than 40 states. This enables us to move forward into the very final stages of remaining work."
Key States Holding Out
Attorneys general from key states like California, New York, Florida and Nevada have questions about the proposal and continue to negotiate.
"My office is continuing to review the intricate draft settlement terms and advocating for improvements to address Nevada's needs," said Nevada's Attorney General Catherine Cortez Masto.
One term of the proposal centers on providing immunity to the banks from future state servicing and origination claims, even though homeowners could continue litigation against banks and states could continue with criminal investigations. A slew of claims against the lenders were made for cutting corners, robo-signing foreclosure documents and not going through proper channels for foreclosures.
Currently Attorney General Kamala Harris of California said that the deal wasn’t good enough for her state, while New York’s Eric Schneiderman will not comment about the current proposal.
Sources close to Harris say that although she hasn’t signed off on the deal, she is more comfortable with an agreement that would allow her to pursue her own investigations and litigation. She told Reuters last Friday that she was "less concerned with the timeline than the details" of the settlement.
Kathleen Day, spokesperson for the Center for Responsible Lending says that while the deal won’t solve the entire crisis, it may hold banks accountable in other mortgage investigations.
However, the accountability factor appears to be making banks a little jittery. The banks, Bank of America, Wells Fargo, JPMorgan Chase, Ally Financial and Citigroup are cool to inking a deal that does not include immunity from mortgage service claims from California and New York.
In fact one anonymous source contends that bank executives may be trying to slow the settlement, concerned about new fraud charges surrounding New York State attorney general’s office suit of Bank of America, JP Morgan Chase and Wells Fargo. The suit focuses on the deceptive and fraudulent use of a private database leveraged to register mortgages.
"I think it's fair to say that the banks are becoming an obstacle to completing this settlement now," the source commented.
Homeowners Find that Big Banks Haven’t Changed Their Old Ways
As negotiations rage on, Acreage Florida homeowners, Jack and Cindy Martin sit in the trenches, feeling as if big bank behavior hasn’t changed even after bankers were busted for sloppy foreclosure procedures.
In 2002 the Martins poured their life savings into building their dream home in the sleepy, up and coming town outside West Palm Beach, only to discover years later that the land was tainted and numerous homeowners, children in particular were becoming stricken with deadly brain cancer.
“When we discovered that our friends and neighbors were getting cancer we tried to communicate with Bank of America to see if we could rework the loan, “Jack explains. “We didn’t want to be deadbeats, so we tried to see about loan modification so we could continue to pay our loan while finding somewhere else to live.”
Martin says that the only response he received was from a customer service representative who told him that the only way the bank would consider modifying his loan was for the Martins to stop paying the mortgage for three months. Martin recalls that this conversation occurred during the summer of 2009--during a time when robo signing and pushing foreclosures aimlessly through the pipeline was commonplace.
“Of course we continued to send the bank letters and make calls, but never received any response,” Jack says. “So we decided to take the hit, get behind three months and then call to see what we’d do. After three and a half months I called the bank only to be laughed at and told that they wouldn’t modify our loan because we were now in default. They told us we would need to catch up on loan payments or they would file for foreclosure.”
The Martins said that as more people around them became ill, they knew staying at the property was not an option. The family of four picked up a few belongings and moved in with Jack’s mother who lives an hour away from the home.
“We continued to make our mortgage payments for a while, but then stopped when we couldn't get anywhere with the bank.” Jack said that his family left the property in the summer of 2009 and Bank of America foreclosed on his home that December.
“There were no notices, letters or any communication about the foreclosure,” Jack says. “The bank came in and simply just changed all the locks, even though I continued to call every few weeks to see if we could do something…anything to rectify the situation. We just wanted to be free of the house and try to pick up the pieces of our life.”
The Martins spent the next year working with a myriad of attorneys, one who ended up being disbarred for mishandling foreclosure cases, and finally had their case thrown out in December 2011. “No one really showed up from the bank because their paperwork was such a mess,” Jack says.
“We thought that after three years we could finally move on,” Cindy says. “Even though it wasn’t the ideal scenario where we had to start over, at least we could move on.” Their plan was to repair the home (and replace stolen air conditioning units and handlers) and make it available for rent with full disclosure.
However, only last month the Martins discovered that without notification Bank of America is trying to repossess their home once again. “After the court case was thrown out, the bank has declared that our home is vacant and is trying to repossess it in order to protect their investment,” Jack says.
“I’ve called the bank numerous times telling them that the home is not vacant, our personal items are still there and we are in the process of making repairs,” he says. “The bank told us that they typically send an inspector to make three standard visits to determine if the home is vacant. If it is deemed to be vacant they will take over and change the locks.”
Jack adds that according to the bank they weren’t going to change the locks until February 6, however when he went to meet a contractor at his home on January 30, locks were changed and he could tell his personal items had been rummaged through and moved.
“One of the many frustrations is that Bank of America Corporation is farming this work out to a field service division that appears to running as a rogue operation. Neither arm communicates with the other and now I’m trying to get back into my house to fix it up so I can make the mortgage payments. We’re in an impossible and aggravating situation.”
“I’m at the brink of breaking,” Cindy wistfully admits. “We’re just not sure how much more we can take.”