Bringing the Economy Home

Where Idaho Borrowers Stand in Today’s Mortgage Settlement

Molly Messick / StateImpact Idaho

A sign advertises a foreclosed home in Nampa, Idaho's Blackhawk Subdivision.

Idaho borrowers will receive close to $100 million from the $26 billion agreement struck between government officials and five of the nation’s largest banks.  That’s according to a statement from the Idaho Attorney General’s office, released this morning.  Here are the specifics, according to that release:

The agreement provides an estimated $99,857,551 in direct relief to Idaho homeowners whose mortgages are owned and serviced by any of the five settling banks and to individuals whose mortgages were serviced by one of the settling banks and who lost their homes in foreclosures.  It also creates loan servicing standards that the settling banks must follow.

Idaho’s estimated share of the settlement is $113,789,551.  From that total:

  • Eligible Idaho borrowers will receive an estimated $74,686,493 in benefits from loan modifications and other direct relief.
  • Approximately 5,000 Idaho borrowers who lost their home to foreclosure between January 1, 2008, and December 31, 2011, because of substandard servicing practices, will receive $9,998,041 in cash payments averaging $1,500 to $2,000 for each affected borrower. These borrowers have been identified by their servicers and will be contacted by the settlement administrator.
  • The settling servicers will pay $15,172,779 to fund a program that allows underwater borrowers to refinance their loans.
  • The state will receive $13,932,238.

The release does not detail how the settlement money will be distributed.  According to The New York Times, “[t]he settlement money will be doled out under a complicated formula that gives banks varying degrees of credit for different kinds of help. As a result, banks are incentivized to help harder-hit borrowers with homes worth far less than what they owe.”  The article goes on to say there are “additional incentives for banks to distribute the money in the next 12 months.”

According to The Wall Street Journal‘s analysis, the settlement will “remove one cloud of uncertainty that has depressed bank stocks,” but may do less to help the housing market.

On its own, the deal won’t be a cure-all for the housing market or to the majority of borrowers at risk of foreclosure. Home prices have fallen by nearly one-third over more than five years, slashing real-estate values by $7 trillion and leaving 11 million homeowners with mortgages that are exceed their property values by $750 billion. High unemployment has frustrated round after round of federal efforts to stem foreclosures. — The Wall Street Journal

The Washington Post’s Wonkblog has this FAQ, which puts the settlement’s size in perspective. “The deal is the largest of its kind since a multi-state agreement with the tobacco industry in 1998,” the piece says. “But that deal was worth around $350 billion in today’s dollars. It’s also not a lot of money compared to the $700 billion in underwater mortgage debt, or the bailout of the banks that issue and bought the debt in the first place.”

The number of foreclosures has eased in recent months, nationwide and in Idaho.  That said, Idaho’s foreclosure rate has been among the highest in the country since the start of the housing crisis.


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