Premium ContentMouse over Home then click on Premium Content for information.Nebraska and Iowa will likely see a relatively small impact from the $25 billion settlement with banks over foreclosure abuses because the housing crisis has not hit the Midlands as hard as it has many other states.
U.S. Housing and Urban Development Secretary Shaun Donovan said that state payouts were determined by a formula based on delinquent loans.
States like California, Florida and Arizona will get the highest restitution amounts, he said in a Thursday conference call with reporters.
But Iowa Attorney General Tom Miller, who was a leader in the 16-month nationwide investigation and settlement negotiations, said he expected to see changes across the mortgage lending industry.
"This agreement not only provides badly needed relief to Iowa borrowers, but it also puts a stop to many of the bad behaviors that contributed to the mortgage mess throughout Iowa and the rest of the country," said Miller, who was in Washington Thursday participating in the bipartisan announcement.
Among other things, the deal requires banks to make foreclosure their last resort. And they can't foreclose on a homeowner who is being considered for a loan modification.
The Nebraska Attorney General's Office said that the state will receive a direct payment of $8.8 million to its cash reserve from the settlement, but it did not say how much Nebraska homeowners would get. The Nebraska Department of Banking and Finance will receive an additional $1 million for foreclosure prevention and education.
Iowa would get a direct payment to the state of about $15 million, Miller said.
He provided a more detailed and broader account of the Hawkeye State's estimated benefits. He put Iowa's overall share at about $40 million, including nearly $6 million in benefits from loan term changes. Iowa borrowers who lost their home to foreclosure in 2008-11 and encountered servicing abuse would qualify for about $7.5 million in payments to borrowers.
And, Miller said, the value of refinanced loans to Iowa's underwater borrowers — those who owe more on loans than what their house is worth — would be an estimated $11.6 million.
Joe Valenti, president of CBSHome Real Estate in Omaha, said he did not see the settlement having much effect on the local real estate market, calling it more of an issue for Florida and some Southwestern states.
"It may help the people who are not able to currently make the payment to negotiate for a lower rate and mortgage amount," he said.
The deal requires the banks to reduce loans for about 1 million households that are at risk of foreclosure. The lenders will also send $2,000 each to about 750,000 Americans who were improperly foreclosed upon from 2008 through 2011. The banks will have three years to fulfill terms of the deal.
According to a new analysis from CoreLogic, a real estate data firm, Nebraska currently is one of five states with the lowest portion of homes in the foreclosure process, 1 percent.
The four other states are: Wyoming (0.7 percent), Alaska (0.8 percent), North Dakota (0.8 percent), and Washington (1.3 percent). Iowa's is 2.2 percent.
The five states with the highest foreclosure inventory were: Florida (11.9 percent), New Jersey (6.4 percent), Illinois (5.4 percent), Nevada (5.3 percent) and New York (4.6 percent).
Nationally, CoreLogic data shows that 1.4 million homes, or 3.4 percent of all homes with a mortgage, were in the foreclosure inventory as of December 2011. A property moves into the foreclosure inventory when a mortgage servicer starts the process after after serious delinquency and it remains there until the foreclosure is completed.
NeighborWorks of Omaha liked Thursday's settlement piece that it said calls for "unprecedented changes" in how mortgage providers service loans, handle foreclosures and ensure the accuracy of information provided in federal bankruptcy court.
"This is great news," said NeighborWorks president and CEO Ken Lyons. "It's not so much about the money, but the procedures and regulations that will now provide homeowner protection that elates me."
He said the majority of "hard- working Americans did not have access to these safeguards until now."
Wells Fargo, one of the banks involved in the settlement, said it has made a financial commitment covering expanded refinance, modification and other customer relief options.
Tom Goyda, Wells Fargo spokesman, said the standards to be enacted would affect all customers. For example, one change already started puts a person who fell behind on payments in contact with one primary banker, rather than several as might have been the case before.
Changes should give borrowers more confidence, he said. "That is where we see good opportunity for greater consistency in mortgage servicing."
As government officials hailed the landmark settlement as long-overdue relief for victims of foreclosure abuses, some consumer advocates said far too few people will benefit.
"I really don't see this as being that big a deal," said Richard Green, director of the University of Southern California Lusk Center for Real Estate. About 11 million households are underwater, meaning they owe more than their homes are worth. The settlement would help 1 million of them.
"The total number of dollars is still small compared to the value of the mortgages that are underwater," said Green. "To some extent, the numbers reflect losses the lenders would have taken anyway. As a result, the net impact is probably not as large as they are saying."
Federal and state officials announced that 49 states joined the settlement with five of the nation's biggest lenders. Oklahoma struck a separate deal with the five banks. Government officials are still negotiating with 14 other lenders to join.
Bank of America will pay the most to borrowers: nearly $8.6 billion. Wells Fargo will pay about $4.3 billion, JPMorgan Chase roughly $4.2 billion, Citigroup about $1.8 billion and Ally Financial $200 million. The banks will also pay state and federal governments $5.5 billion.
The settlement ends a painful chapter of the financial crisis, when home values sank and millions edged toward foreclosure. Many companies processed foreclosures without verifying documents. Some employees signed papers they hadn't read or used fake signatures to speed foreclosures — an action known as robo-signing.
President Barack Obama praised the settlement, saying it will "speed relief to the hardest-hit homeowners, end some of the most abusive practices of the mortgage industry and begin to turn the page on an era of recklessness that has left so much damage in its wake."
The states have agreed not to pursue civil charges over the abuses covered by the settlement. Homeowners can still sue lenders on their own, and federal and state authorities can still pursue criminal charges.
The deal is subject to approval by a federal judge. It's the biggest settlement involving a single industry since the $206 billion multistate tobacco deal in 1998.
But for the many people who lost their homes to foreclosure in the past two years, some of them improperly, a check for $2,000 is small consolation."Two thousand dollars won't cover my moving costs," said Brian Duncan, who was evicted from his Tempe, Ariz., home last April.
This report inclues material from the Associated Press.
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