Top 5 lenders: $500M spent in Ariz. - USATODAY.com

The nation's five biggest lenders say they recently spent more than a half-billion dollars to help struggling Arizona homeowners, according to a report released Wednesday on the status of the $25billion lender settlement.

So far, 7,735 of the state's mortgage borrowers have received aid from the settlement, which was announced in February. Most of those people were given help completing short sales. All the lenders except Bank of America also reported they completed loan modifications and refinancings to help borrowers stay in their homes.

However, it's been difficult to find many of the more than 7,000 Arizona homeowners who received the aid outlined in the report.

"We have seen one loan modification with a principal reduction from the settlement," said Patricia Garcia Duarte, president and chief executive of Phoenix-based Neighborhood Housing Services. "The report's figures are a little surprising."

Her agency, one of the state's top housing non-profits, worked with a client whose loan amount was reduced by $110,000 because of the settlement.

In Arizona, the average aid to each borrower helped by the settlement is $75,000, according to Wednesday's preliminary report on the mortgage settlement between the country's attorneys general, Ally Bank, Citibank, Chase, Wells Fargo and BofA. The lenders agreed to the deal to settle accusations of foreclosure abuses.

"The numbers from the mortgage-settlement report sound very good, but I am not seeing it yet," said Mike Trailor, Arizona Housing Department director. Trailor said he talked to a group of homeowners Tuesday night and none reported help from the settlement.

Nationally, the five lenders included in the settlement reported providing $10.6million between March 1 and June 30 to help nearly 138,000 borrowers.

This is the first report from Joseph Smith, former North Carolina banking regulator and the official monitor of the settlement. The lenders provided information on the borrower aid they have provided so far, and Smith will now spend the next few months verifying it. Plans call for him to release another report in November.

In Arizona, $522 million, or almost 90 percent, of the $585 million the lenders reported using to help homeowners went toward short sales. Nationally, $8.7billion of the $10.6billion in lender aid went to short sales.

The lenders report providing more than $10billion in aid, but that doesn't mean they are halfway to meeting their obligations under the $25billion settlement. It's not a dollar-for-dollar agreement. The banks receive partial credit for some types of aid because they don't help homeowners as much. For example, a short sale garners a lender a 45-cent credit toward the settlement for every dollar it writes down.

If a lender doesn't fulfill its financial part of the settlement within three years, or by March 2016, it must pay a penalty of at least 125percent of its unmet commitment.

"Thousands of solicitations have gone out to homeowners eligible for help through this settlement," U.S. Secretary of Housing and Urban Development Shaun Donovan said in a conference call with reporters Wednesday morning. He said the results would be tracked carefully.

Donovan said the settlement also sets rules to prevent the recurrence of past foreclosure abuses in the lending industry.

Federal housing plans haven't been as successful in helping struggling homeowners.

Programs such as the Home Affordable Modification Plan and ones funded by the federal Hardest Hit funds rely on lenders to participate without a legal obligation.

The Housing Department also has been working to get lenders to reduce how much underwater Arizona homeowners owe on their mortgage by matching the reductions with up to $75,000 in federal funds.

"It's been tough and is still tough to do principal-reduction modifications," Trailor said.

The state agency originally allotted most of its $250million in money from the Hardest Hit program for those type of loan modifications. It has been able to spend only $16million.

By Catherine Reagor, The Republic|azcentral.com Aug 30, 2012


Top 5 lenders: $500M spent in Ariz. - USATODAY.com