Nevada joins states in $25 billion foreclosure abuse deal
Nevada, one of the states hardest hit by the collapse of the housing market, will get an estimated $1.5 billion from a $25 billion nationwide settlement over foreclosure abuses, Attorney General Catherine Cortez Masto said Thursday.
"After careful deliberation and negotiation with our federal partners and banks … I decided it was in the state’s best interest to opt into the national foreclosure settlement," Masto said in a statement. "This settlement represents a step in the right direction."
Masto had earlier balked at joining any settlement that would prevent her office from going after abusive lenders, but she said the deal struck between the states and five major banks allows "criminal prosecutions and civil investigations" of the foreclosure crisis.
In a separate but related action Thursday, Masto announced that she had settled another lawsuit against Bank of America. The settlement with the nation’s second-largest bank will set aside $750 million in principal reduction and short sales in Nevada and requires the bank to suspend its foreclosure sales of any borrower eligible to participate in the multistate deal.
She said the separate deal with Bank of America will "bring in more money for Nevadans than would have been available under the multi-state settlement alone."
The $25 billion settlement is between 49 states and Bank of America, JP Morgan Chase & Co., Wells Fargo & Co., Citibank and Ally Financial. It includes $5 billion in cash for states to pay for foreclosure-prevention initiatives. Oklahoma made a separate deal with the five banks.
Some $17 billion will pay for mortgage forgiveness, forbearance, short sales and other aid to homeowners. Servicers will provide $3 billion in refinancing to lower homeowners’ interest rates and will pay about $1.5 billion more to homeowners harmed by foreclosure abuses.
Nevadans who have been harmed by foreclosure abuses, such as "robosigning" of documents, can expect checks for $1,500 to $2,000.
Mortgage servicers are required to fulfill these obligations within three years, according to the U.S. Department of Justice.
Larry Murphy, owner of Sales Traq in Las Vegas, said the settlement doesn’t go far enough, especially because it doesn’t affect mortgages issued by Freddie Mac and Fannie Mae.
"It’s an insignificant amount of money," Murphy said. "I think it’s not going to do a lot for Las Vegas. "I’m surprised that (Masto) bought off on it."
He said if Nevada, California and New York had held out a little longer, they might have been able to get a better deal. Only about half of the nation’s mortgages are covered by the deal, he said.
"I really don’t see this as being that big of a deal," said Richard Green, director of the Lusk Center for Real Estate at the University of Southern California. "In reality, the total number of dollars is still small compared to the value of mortgages that are underwater. To some extent, the numbers reflect losses the lenders would have taken anyway."
Green said the net impact of the settlement "is probably not as large as they are saying."
If approved by a federal judge, the mortgage settlement would be the largest involving a single industry since a 1998 multistate tobacco deal. The Tobacco Masters Settlement Agreement called on tobacco companies to pay $206 billion over the first 25 years of the settlement.
Senate Majority Leader Harry Reid, D-Nev., praised Masto for her role in negotiating a settlement for Nevada.
"I’m very proud of her and confident that the work she did will bring dividends to the beleaguered housing industry in Nevada," Reid said on the Senate floor Thursday.
Masto’s decision to sign the landmark mortgage settlement was popular on both sides of Nevada’s political aisle.
Sen. Dean Heller, R-Nev., said he was pleased that the settlement would provide more protection and some relief to Nevada homeowners.
"No state has been hit harder by the foreclosure crisis than Nevada," Heller said in a statement. "Unfortunately, abuses by the banking industry made a bad situation worse. Actions by the banking industry helped create this housing crisis. They have an obligation to help get us out."
Rep. Joe Heck, R-Nev., said he is "happy to see that an agreement was reached. At a time when Nevada families are struggling the most to make ends meet, I have high hopes that this settlement will provide them much needed relief."
Rep. Shelley Berkley, D-Nev., was hopeful the settlement achieves its intended result for Nevada, saying, "Providing relief for responsible homeowners and holding Wall Street banks accountable for their reckless behavior."
Berkley said we must "ensure this never happens again."
Contact reporter Chris Sieroty at csieroty@reviewjournal.com or 702-477-3893. Reporter Hubble Smith contributed to this report.
What Nevadans will getNevada’s estimated share of the national settlement is $1.5 billion.
Nevada borrowers will receive about $1.3 billion in benefits from loan term modifications and other direct relief. Nevadans who lost homes to foreclosure from Jan. 1, 2008, through Dec. 31 and suffered servicing abuse would qualify for $57 million in cash payments.
The value of refinanced loans to Nevada underwater borrowers would be an estimated $42 million.
The state will receive a direct payment of $60 million. How it will be used has not been determined.
For additional information, access nationalmortgage settlement.com or call your bank:
• Ally/GMAC: 800-766-4622
• Bank of America: 877-488-7814
• Citigroup: 866-272-4749
• JP Morgan Chase: 866-372-6901
• Wells Fargo: 800-288-3212
Source: Nevada attorney general
