California Secures $18B in Robo-Signing Settlement
By: Krista Franks
Thursday’s unprecedented $25 billion settlement between federal and state officials and the nation’s top mortgage servicers was especially favorable to California.
After leaving settlement negotiations in September, claiming the proposal at the time was “inadequate” for California homeowners, Attorney General Kamala Harris opted to sign on to the final settlement, which was revised to secure $18 billion for the state of California.
At the time Harris left the settlement, California was expected to receive about $4 billion from the banks. As the state hardest hit by the housing crisis, Harris insisted the amount was insufficient.
The $18 billion secured for California “is the result of an insistence that California receive a fair deal commensurate with the harm done here,” Harris stated Thursday.
“California families will finally see substantial relief after experiencing so much pain from the mortgage crisis,” she said.
The full amount will be broken into several categories to assist various groups of struggling homeowners.
According to the agreement, banks will offer $12 billion in principal reductions and short sales for about 250,000 homeowners. The banks are obligated to complete the principal reductions for homeowners in California’s hardest hit communities within one year of the settlement date.
About $849 million is designated for the refinancing for about 28,000 underwater homeowners.
Approximately $1.1 billion will go to forbearance, transition assistance, and neighborhood stabilization.
Another $3.5 billion will relieve about 32,000 foreclosed homeowners of unpaid balances.
Lastly, the banks will pay $430 million in “costs, fees and penalty payments.”
In addition to the benefits from the national settlement, Harris procured “separate enforceable guarantees to ensure that banks will be accountable for their commitments to California,” according to a statement from Harris’ office.
Contrary to the broader national settlement, which is enforceable only in federal court, Harris maintains the right to pursue the banks in California state courts if they do not adhere to the agreement.
With the settlement final, Harris is not resting on her laurels. She plans to continue to pursue her joint investigation with Nevada and will expand California’s Mortgage Fraud Strike Force.
She will also “continue to fight for principal reductions for the approximately 60 percent of California homeowners whose loans are owned by Fannie Mae and Freddie Mac,” she said.
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