Advocates Not Impressed With Foreclosure Settlement
STEVE INSKEEP, HOST:
It's MORNING EDITION from NPR News. Good morning, I'm Steve Inskeep.
Here's a sign of just how huge the housing and foreclosure crisis has been. Five big banks agreed to pay about $25 billion to people who've been harmed bank's abuses, plus an extra billion to settle a claim involving a mortgage company. And one of the first reactions is that all that money could not possibly be enough.
President Obama says the banks will spread the money around.
PRESIDENT BARACK OBAMA: They'll provide refinancing for borrowers that are stuck in high interest rate mortgages. They'll reduce loans for families who owe more on their homes than they're worth. And they will deliver some measure of justice for families that have already been victims of abusive practices.
INSKEEP: But think of that phrase: a measure of justice. The president means a payment for people who suffered foreclosure whether they deserved it or not.
NPR's Richard Gonzales reports on how the money breaks down.
RICHARD GONZALES, BYLINE: For the past four years, Jose Rodriguez has been working for a non-profit group helping homeowners in the San Francisco Bay Area stay in their homes when they faced foreclosure. Upon hearing the news of the settlement with the banks, he had one question.
JOSE RODRIQUEZ: How significant is the settlement that's going to actually reach the homeowner?
GONZALES: Rodriguez says he applauds the deal in which the banks agreed to pony up $20 billion in loan modifications, either through refinancing loans or reducing the principal owed. There's another $5 billion in cash, some of which will go the states and some to compensate homeowners who have already been foreclosed. But that comes to just about $2,000 for a former homeowner.
RODRIQUEZ: What does $2,000 do for somebody? Two thousand dollars when you've been kicked out of what you thought was your accomplishment of the American homeownership dream?
GONZALES: Deborah Almeida of Galt, a city about twenty miles south of Sacramento, is skeptical too. She and her husband bought a house that's now worth less than half of what they bought it for in 2005. She says was making payments under a loan modification, but the bank foreclosed anyway. Only one element of the settlement agreement might help her, says Almeida.
DEBORAH ALMEIDA: Principal reduction but principal reduction at market value. That is the only way that I would stay in this home is if I got my house at market value, which right now is about $190,000.
GONZALES: Another homeowner, Jose Vega, father of two from Pittsburgh, is also underwater. Vega says he was making payments under a loan modification program when the bank foreclosed. The bank eventually backed off. But he says the bank is charging him for the cost of its legal fees. Now he's not confident the settlement will work out for his family.
JOSE VEGA: I've been lied to by the banks so much. They put you through all this. You talk to five people when you're dealing with them, you'll get five stories. So what that does is you lose trust. Because you think you're dealing with a corporation that's responsible? And you find out its not really that way anymore.
GONZALES: Vega says the only way he'll believe that the settlement is real is if the government keeps up its pressure on bank lending practices.
Richard Gonzales NPR News, San Francisco. Transcript provided by NPR, Copyright NPR.