Major mortgage settlement: What does it mean for you?
Arizona will get $1.6 billion of national settlement
Reporter: Claire Doan
TUCSON (KGUN9-TV/AP) - A 25-billion dollar settlement will help lower mortgage payments for people who owe more than their houses are worth - and pay cash to those who lost their homes because of foreclosure abuses.
49 states, including Arizona, are part of settlement with the nation's five largest lenders: Ally/GMAC, Bank of America, Citigroup, JPMorgan Chase and Wells Fargo. President Barack Obama called the deal good for families and the economy.
"We have reached a landmark settlement with the nation's largest banks that will speed relief to the hardest-hit homeowner and some of the most abusive practices of the mortgage industry and begin to turn the page on an era of recklessness that has left so much damage in its wake," the President said.
The settlement won't help everyone. It excludes mortgages owned by Fannie Mae and Freddie Mac, meaning almost half the nation's mortgage holders are ineligible.
Arizona will receive $1.6 billion of that national settlement to aid current homeowners - and people who have already lost their homes.
However, 9 On Your Side spoke with Blanca Ortiz, a struggling homeowner who doubts the settlement will help people like her. She needs to refinance because she became disabled and her husband lost his job, but says her lender Bank of America has been making the process incredibly difficult.
"It's a total nightmare. We've been at this for over two years. Every time we submit paperwork, they keep asking for more paperwork. Or it's never enough. Or we have to submit everything and it keeps going," Ortiz said. "You don't know how many days I've cried over this - just the idea that you're discounted as a person."
However, Attorney General Tom Horne said the settlement will bring much-needed relief to the state: "Arizona has suffered more than other states in this mortgage market and so we are getting a disproportionate settlement."
According to his office, $1.3 billion to go toward lowering mortgage payments and other relief. $85 million will be dedicated to refinancing loans for current underwater borrowers. A direct payment of $102 million will go to the state. Finally, a $2,000 payment will go to homeowners who went into foreclosure from 2008 to 2011, and had servicing problems.
Evelia Martinez, the special projects manager at Don't Borrow Trouble, said that payment is not enough.
"I don't believe it's a fair deal. Why? $2,000 does not replace a home," Martinez said, adding that there may be finite requirements that limit those who qualify. She added that banks will eventually recoup their losses by getting money from consumers through higher fees elsewhere.
Ortiz is praying for a miracle, but does not believe the settlement will change the way lenders operate.
"What i can say to them is they have no conscience and they have no compassion. And they basically don't have to follow any rules," Ortiz said.
Because of how complex this deal it, it will likely take three years to iron everything out. Borrows will not immediately know whether they qualify for relief. However, a website has been set up - www.nationalmortgagesettlement.com - for homeowners who want more information.
This deal stops states from pursuing civil charges against lenders, but individuals can still sue banks in civil court on their own. In additional, states and the federal government can pursue criminal charges.