Most Aid From Mortgage Settlement in State Going to Short Sales

Los Angeles Times
November 19, 2012
Lazo, Alejandro; Reckard, E. Scott

Distressed California homeowners will receive financial relief from big banks after a landmark $25 billion mortgage settlement with 49 U.S. state attorneys general and certain federal agencies. The settlement requires banks to aid homeowners through modifications such as principal reduction and short sales. It gives banks credit for both principal reductions and short sales, but the banks must give 60 percent of the relief nationally through principal reduction that allow families to keep their homes. UCR Irvine law professor Katherine Porter, who monitors the accord on behalf of the state attorney general's office, says short sales should be reserved for homeowners who cannot afford to keep a home even with a lower principal or who need to move for other reasons. In California, mortgage servicers Wells Fargo, Bank of America, and JPMorgan Chase promised to contribute $12 billion worth of homeowner aid. Through Sept. 30, they had provided $8.4 billion. About 68 percent of those funds, however, went toward short sales for homeowners, to the disappointment of consumer advocates. "Our hope and expectation was that principal reduction for first lien loans would be the bulk of it," remarked Kevin Stein of the California Reinvestment Coalition.
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