- The Enterprise
- The Recorder
Housing advocates and state lawmakers are hoping an almost $60 million payout as the result of a settlement with the nation’s five biggest mortgage lenders will assist in curbing the state’s foreclosure crisis.
“I think this will help in a significant way in terms of reducing housing inventory in Maryland and helping people stay in their homes,” said Attorney General Douglas F. Gansler (D), who along with 48 other state attorneys general negotiated the $25 billion settlement that was finalized in April.
The settlement was the result of an investigation into foreclosure abuses, including fraud and mortgage servicing practices such as “robo-signing,” the practice in which individual bank employees signed thousands of foreclosure documents without verifying the information they contained.
The vast majority of the nationwide settlement — all but $2.5 billion — was set aside to help struggling homeowners reduce or restructure their loans and for payments to owners whose homes were unfairly foreclosed.
The remaining $2.5 billion was given to states for discretionary spending on housing-related projects, although some states have opted to use the settlement money to plug budget holes.
Twenty-seven states, including Maryland, are using the money almost exclusively for housing programs, said Amanda Sheldon Roberts, housing director at Enterprise Community Partners, a Columbia-based affordable housing group.
She has been tracking how states are spending the settlement funds and applauded Maryland’s effort.
“The foreclosure crisis looks different in different places. What’s important is that each state targets its money appropriately,” said Roberts.
If that is done, it could make a dent in the effects of foreclosure nationally, she said.
Of it’s $60 million share of that discretionary funding, Maryland oficials said $14.8 million will go to nonprofit housing counselors and legal assistance programs; $14 million will be used as neighborhood stabilization grants throughout the state; $10 million each will go to Baltimore city and Prince George’s County, the two hardest-hit jurisdictions in the state, for neighborhood stabilization; $2.1 million is allocated for financial fraud prevention programs, and $2.7 million will go to the Office of the Attorney General for continued housing-related civil and criminal investigations.
Baltimore lawmakers have said they will funnel the money to demolition projects, while Prince George’s officials say they will focus the money on rehabilitation of blighted properties in the county’s five ZIP codes with the highest foreclosure rates.
“It’s great that a lot of resources are going statewide, but it’s also great that the state is targeting those areas that were hardest hit,” Roberts said.
The settlement also stipulated that 10 percent of each state’s share was considered a payment for damages, which Maryland’s AG office will deposit into the state’s general fund, a customary move in civil penalty cases.
The $6 million very likely still will touch housing programs, though, Gansler said, noting that it costs the state about $2 million per year to run a home counseling call center, and the settlement is scheduled to pay out over three years.
Several other states also have dedicated 10 percent to their general funds to help cover the cost of the two-year legal battle with the mortgage banks, Roberts said.
Five states, including Georgia and Missouri, already have seen their funds from the settlement allocated almost entirely to non-housing-related programs, such as economic development and higher education. An additional 10 states, including Virginia, have allocated a portion of their funds to nonhousing projects.
O’Malley said the state has taken a number of steps during the last several years to stave off foreclosures and the latest funding is another step toward recovery of the housing market.
At one time, Maryland had a foreclosure rate that was much higher than the national average; now, because of the steps taken to battle the rate down, it is 57 percent below the national foreclosure rate, O’Malley said.
In 2009, Maryland had the 10th-highest foreclosure rate in the country, according to the Department of Housing and Community Development.
Since 2008, lawmakers have passed bills that slowed the state’s former “fast-track” foreclosure process, tightened mortgage lending standards and expanded mediation opportunities for homeowners at risk of foreclosure, O’Malley said.
To learn more
Under the Mortgage Servicing Settlement, banks are required to contact borrowers directly regarding cash payments, refinancing or other loan modifications.
However, borrowers should, with the assistance of a nonprofit housing counselor, contact their mortgage servicer to obtain more information about specific loan modification programs and whether they qualify under the terms of this settlement, according to the attorney general’s office.
Housing counselors can be reached through the Maryland HOPE Hotline at 877-462-7555 or the Maryland Office of the Attorney General at 410-576-6300 or 888-743-0023.