Report: Mortgage settlement will help states’ housing crisis

A $26 billion settlement over foreclosure abuses will send billions of dollars to state governments, according to a report by The Council of State Governments (CSG). The settlement between 49 states and the nation’s largest mortgage lenders is the “largest joint federal-state civil settlement in the history of this nation,” said U.S. Attorney General Eric Holder.

The agreement addresses improper foreclosure procedures, including “robosigning” in which mortgage company employees signed off on documents without verifying information. The settlement involves big banks including Ally Financial, Bank of America, Citigroup, J.P. Morgan Chase and Wells Fargo. The deal includes every state except Oklahoma.

Most of the money goes for mortgage debt forgiveness, refinancing and compensation for homeowners. The states will also receive several billion dollars for unspecified “foreclosure prevention initiatives,” according to CSG.

The hardest hit states will get the biggest chunk of the money, including up to $12 billion for California, where in December at least 30 percent of homes were considered underwater, with homeowners owing more than the homes are worth. States where the housing situation is less severe will receive less money, including North Dakota where about 7 percent of homes are considered underwater. The state will receive about $3 million, according to the state attorney general.

The CSG report includes details on the mortgage settlement, a state-by-state breakdown, information on state responses and legislation to address the foreclosure crisis, and a look at how Midwestern states rank in mortgage foreclosures.

“I commend state officials for taking the lead on this issue,” David Adkins, executive director and CEO of CSG, said in a statement. “The settlement provides states with some of the tools and resources needed to address the crisis in the housing market. This settlement demonstrates the power the states can collectively leverage for the benefit of their citizens.”