Oppenheim Law

Florida gets $8.4 billion share of foreclosure settlement

News   •   Feb 09, 2012 21:09 EST

By Paul Owers, Sun Sentinel

9:01 p.m. ESTFebruary 9, 2012

It may be months before current and former South Florida homeowners know for sure whether they can get a slice of the $25 billion nationwide foreclosure settlement, but tens of thousands will be waiting for their chance.

Florida's share of the agreement with the nation's five largest lenders is roughly $8.4 billion, second only to California's $12 billion.

Nearly half of Florida's take could trickle down to Palm Beach, Broward and Miami-Dade counties, mostly in the form of loan modifications and other relief, said Roy Oppenheim, a foreclosure defense lawyer in Weston.

But individual homeowners expecting big financial payouts may be disappointed.

Under terms of the settlement, about 750,000 people nationwide can expect payments of up to $2,000 if they endured mortgage servicing abuse as part of the robo-signing scandal while losing their homes to foreclosure from 2008 through 2011.

Banks will be required to reduce mortgage balances for 1 million homeowners nationwide, but the average reduction is estimated at $20,000 — a relatively small sum for the many local homeowners underwater by at least $100,000, critics say.

"Will this be super, meaningful relief that will change the fabric of South Florida overnight? Absolutely not," Oppenheim said Thursday. "But it's an acknowledgment of a cleansing process that is starting."

Guy Cecala, publisher of Inside Mortgage Finance, an industry newsletter, said it's important to move past the lender foreclosure scandal, although he criticized the agreement for containing too many limitations.

"If you ask people who have been foreclosed on how they feel about getting $1,500 or $2,000, they'd say it's better than a hit to the stomach or head, but it doesn't give them their home back," Cecala said.

Nearly 400,000 South Florida homeowners, or about 47 percent of single-family homeowners with a mortgage, owe more than the house is worth, according to real estate website Zillow.com. More than 72,000 homes in Broward and Palm Beach counties have been repossessed since 2008, according to RealtyTrac Inc., a foreclosure listing firm.

"South Florida has suffered inordinately," said Ken Thomas, a Miami-based banking analyst.

Borrowers in the Sunshine State will receive about $7.6 billion in benefits from loan modifications, including principal reduction on their mortgages, Attorney General Pam Bondi said in a statement. People who lost their home through improper foreclosure practices will share payments totaling $170 million.

People won't immediately know whether they're eligible for aid. During the next six to nine months, officials will identify and send letters to those who qualify. Those who may be difficult to locate should contact Bondi's office at 850-414-3300.

The agreement will be executed over three years. For more information, visit nationalmortgagesettlement.com.

"This settlement will provide substantial relief to struggling Florida homeowners, and ensures that our state gets its fair share of the relief being provided nationally," Bondi said. "This agreement holds banks accountable and puts in place new protections for homeowners in the form of strict mortgage servicing standards."

The deal requires banks to make foreclosure their last resort. And they can't foreclose on a homeowner who is being considered for a loan modification.

Bondi was one of 49 state attorneys general to back the agreement with Bank of AmericaJPMorganWells Fargo & Co., Citigroup Inc.and Ally Financial Inc. Oklahama didn't participate in the agreement but reached its own accord with lenders.

The national settlement applies only to privately held mortgages, meaning it doesn't reach those who have loans held by Fannie Mae and Freddie Mac. Those government-run companies own nearly half of all U.S. mortgages.

The settlement comes more than a year after attorneys general announced an investigation into foreclosure practices following disclosures that banks were using faulty documents to repossess homes.

Some bank employees, called "robo signers," admitted under oath that they signed off on thousands of foreclosures without knowing the details.

In late 2010, some lenders suspended foreclosures while they reviewed cases for possible paperwork errors. In March 2011, the David Stern law firm in Plantation, accused of being a so-called foreclosure mill, shuttered after major mortgage servicers took their business elsewhere.

Shaun Donovan, secretary of U.S. Housing and Urban Development, said in a conference call with reporters that the agreement didn't focus just on the problems uncovered in the robo-signing controversy. It also was designed to acknowledge lender abuses, such as hidden fees and lost paperwork, that occurred early in the housing bust.

Some say the settlement doesn't punish banks enough, but President Barack Obama praised the pact as a way to "begin to turn the page on an era of recklessness."

Sun Sentinel wire services contributed to this report.

Powers@tribune.com, 561-243-6529 or Twitter @paulowers