Distressed homeowners on the North Coast will receive $335 million under a landmark $25 billion agreement announced Thursday to settle allegations of mortgage abuses by five of the nation's largest lenders.
Sonoma County could receive an estimated $267 million, Mendocino County $25 million and Lake County $43 million, the state Department of Justice said Thursday.
“California families will finally see substantial relief after experiencing so much pain from the mortgage crisis,” Attorney General Kamala Harris said in a statement.
But consumer and housing advocates said the deal didn't go far enough.
“It sure doesn't seem like a lot for someone who lost their home maybe illegally, but it is what it is,” said Jami Walsh, foreclosure counselor with Catholic Charities in Santa Rosa. “It's a shot in the arm that we've all been waiting for, and we'll take it, whatever it is. This is giving people some hope.”
The settlement aims to help troubled borrowers by requiring the five banks to reduce the amount borrowers owe on their mortgages, lower their interest rates and pay restitution to homeowners who suffered mortgage-related abuses. It will force lenders to revamp how they interact with struggling mortgage holders and bar them from trying to foreclose on borrowers while simultaneously negotiating mortgage modifications.
In addition, firms will have to make sure borrowers have a single point of contact with a lender, rather than being shuttled to different employees with each interaction.
The deal grew out of an investigation by all 50 state attorneys general into revelations that banks had evicted borrowers with incomplete or false documentation.
Nationwide, the settlement includes $1.5 billion in restitution payments to victims of improper foreclosures. Spread among an estimated 750,000 potential recipients, that amounts to only $2,000 per person.
“That's such a tiny amount compared to what they lost,” said Georgia Berland, executive officer of the Sonoma County Task Force for the Homeless. “To me that just seems minuscule really, and I don't see how that will change someone's life. It's not going to get someone out of homelessness, for sure.”