To get a better understanding of how yesterday’s $26 billion dollar mortgage settlement will affect Idaho borrowers, StateImpact spoke to Brett DeLange, the Consumer Protection Division Chief for the Idaho attorney general’s office. While the settlement is facing criticism and questions about its worth to homeowners, DeLange says thousands in Idaho stand to benefit.
Q: How will these payments be distributed?
A: Part of the settlement agreement provides for a settlement administrator, or a claims administrator, paid for by the banks who will administer the settlement. We’ve selected an administrator with extensive experience in identifying and working with vast, massive settlements like this one will be. People will be identified. They’ll be contacted. The process won’t be immediate, but people will be contacted and notified about eligibility and their options under the settlement.
Q: How will that work? Do they have a database of underwater homeowners and they’ll be assessing their eligibility?
A: Yes. It will be complex, but there’s a variety of databases they’ll be looking at and then there’s a variety of other databases to identify their location. And then the settlement gives options for benefits to be offered. Homeowners will not need to reach out. Now, that said, if a homeowner thinks they should have heard, we welcome them to contact us. In fact our webpage will have a form that they can fill out that we will then contact the administrator and say, “This person hasn’t heard yet. Is there a problem?”
We want to help citizens. So down the road a ways, if someone says, “I think I should have heard by now,” then they’ll have the ability to tell us and we will contact the administrator for them.
Q: Are there particular dates homeowners should be aware of, if they are waiting to be contacted?
A: Right now there are not, but what I would suggest people do is go to our website. (A second website dedicated to the settlement is here.) We’re finalizing it, but our website should be up fairly soon, and there will be plenty of notices and announcements. People then will be able to learn more in detail and carefully. Right now, I don’t have dates to tell you, but we will be disclosing that to people.
Q: For the 5,000 borrowers in Idaho who we know lost their homes due to ‘robo-signing’ and substandard mortgage practices, they will get payments averaging $1,500 to $2,000.
A: That’s true. Part of the settlement is for people who lost their home due to one of these untoward practices. They will be identified and offered the settlement check.
Q: But for the most part the money is going to come as a reduction in loan payments, is that right?
A: Well, for people who are still in their homes, that’s where some of these other benefits kick into play. It may be a reduction in principal. It may be a refinancing. Some people, you know, are in homes that are underwater. They have a high interest rate, but they can’t qualify to refinance. Well, this will allow some refinancing, lower interest rates, the goal being to help these people keep their home, and make their payments so that they don’t end up facing foreclosure.
Q: As you’ve indicated, some underwater homeowners will be eligible and some will not.
A: Well, part of the eligibility is with respect to people whose mortgages are owned by one of the settling defendants. There are a lot of mortgages in Idaho where the mortgages are not owned by the settling defendants. They could be owned by Fannie Mae or Freddie Mac. Well, those people will not have an opportunity for a financial benefit.
Q: In other words, this will help a minority of underwater homeowners in the state.
A: Yes, because while the banks involved are the five largest, the mortgages they own are probably less than 30 percent of all the mortgages in the state. There’s other banks. There’s Freddie and Fannie.
Q: We know the total settlement amount for Idaho. It’s nearly $100 million going to borrowers. Do you know how many people that’s likely to include?
A: It’s probably best to say it will be in excess of 10,000. Beyond that I’m really speculating.
Q: Do you know what percentage of underwater borrowers in Idaho that is?
A: I don’t, at this time. At one time there was the estimate, in the Treasure Valley, for example, that a third of the homes were underwater. That number is getting a little dated, but it gives you a sense of the size of the problem.
Q: Do you have a sense of what this could do to assist Idaho’s housing market?
A: I think it will assist in a couple of ways. It’s going to change the marketplace, in terms of how mortgage foreclosure and servicing are done, and that will be a great help to our citizens. They’ll be treated better. They’ll get better information. They will be in a position to make better judgments as a result. So that’s a plus.
Secondly, with respect to the money, the large share – almost $89 million – is going to be helping people keep their homes and pay their mortgages so that they aren’t foreclosed and don’t have to move. That should have a tremendous assist to homeowners throughout the state.
Q: Idaho got roughly $100 million. How was that determined?
A: Actually, we do better than many states. It’s a function to some degree of the fact that foreclosure and the housing crisis has hit our state harder than quite a few other states. If you look at $100 million for Idaho, well, we’re twice what some other states are getting that have populations two or three times larger than us. But that’s a function of the housing crisis. It hit us harder than a number of those states.
This interview has been edited and shortened.