Last day to tell state how to spend giant mortgage settlement

May 13, 2012 | Orlando Sentinel

Florida is now sitting on about $300 million in mortgage-settlement funds, and everyone from real-estate agents to victimized homeowners has been advising state Attorney General Pam Bondi on how to spend it.

The public has until the end of today to email or call the Florida Attorney General’s Office with suggestions for spending the money, part of a $25 billion legal settlement of abusive-lending allegations reached in February between attorneys general for 49 states and the nation’s five biggest mortgage lenders.

Orlando resident Eric Larson thinks the state’s top priority should be investigating any lenders that don’t appear to be honoring terms of the settlement. Larson and his wife are underwater on a mortgage held byCitigroup and serviced by Wells Fargo — two of the five lending institutions that signed the agreement. Even though the couple have been making all of their loan payments and want only to reduce the mortgage’s 7.1 percent interest rate, Wells Fargo has told them they do not qualify for help.

“We feel like we did the right thing every step of the way,” Larson said. “Really, it just feels like we’re setting a pile of money on fire every month. … I don’t want to do what all my neighbors did, which is to short-sell or just walk away.”

By Thursday, the attorney general had received ideas for spending the settlement money from 1,500 individuals and groups.

Florida Realtors, a trade association representing the state’s real-estate industry, has pushed with others for at least one-third of the money to be placed in an affordable-housing trust fund raided for more than $900 million by state lawmakers during the past decade. U.S. Rep. Kathy Castor, D-Tampa, has asked Bondi to press for funds to be spent on debt counselors for financially stressed homeowners and on a federal foreclosure-relief program. Media outlets have lobbied for some of the cash to be spent on legal counseling for homeowners.

Bondi’s office has not set a deadline for deciding how to spend the state’s allotment of the settlement. The national agreement calls for the money to be spent beefing up foreclosure-prevention programs, lessening the effects of the current foreclosure crisis or cracking down on mortgage-lending abuses. Examples of recommended measures include hiring housing counselors and creating mortgage-hotline, loan-mediation, property-remediation and anti-blight programs.

The $300 million up for grabs now in Florida is but one small slice of the $8.4 billion that the nation’s five top lenders — Bank of America, Citigroup, Chase, Ally/GMAC and Wells Fargo — have agreed to spend in the state. It’s the largest legal settlement to wash over Florida since the nation’s tobacco companies paid Florida $13 billion in 1998.

The $8.4 billion from the mortgage settlement is supposed to target various groups in different proportions across the state:

•Most of the money, $7.6 billion, is supposed to be distributed to homeowners whose mortgages were serviced by one of the five big lenders.

•About $170 million is slated for homeowners who lost their homes to foreclosure from Jan. 1, 2008, to Dec. 31, 2011, and suffered from abusive lending practices; they can expect $2,000 each.

•An additional $309 million has been allocated for homeowners seeking to refinance properties that are “underwater” — that is, worth less now than the balance remaining on their loans.

•About $34 million will wind up in the state’s general-revenue fund.

The grab for settlement dollars has already generated controversy in at least one of the country’s other hardest-hit foreclosure states: Arizona. Lawmakers there laid claim to $50 million of a $97.7 million settlement pool, saying their attorney general should not have had discretion over the money. Missouri and Wisconsin have already used some or all of their money to help their general funds.

The mortgage-settlement discussions in Florida have focused more on the type of housing-assistance programs that should benefit from the cash. The nonpartisan Sadowski Housing Coalition, which includes 24 statewide organizations, has pushed for using more than $100 million of the money to support the State Housing Initiative Program, known as SHIP, and the State Apartment Incentive Loan Program, known as SAIL.

“SHIP is completely aligned with allowable settlement uses, such as rehabbing, refurbishing abandoned [housing] stock, closing costs and down payments,” said Jamie Ross, a facilitator for the coalition. “And it can be used for security deposits or first- and last-month rent payments.

SAIL, Ross said, “helps with construction or preservation of affordable housing.”

Giving affordable-housing programs a boost is a great idea, said Larson, the Orlando homeowner whose property is financially underwater. But money should first be spent helping qualified homeowners stay in their houses, he said.

Larson, now stuck with a downtown condominium worth less than half of what he paid for it five years ago, said he has tried persuading Bondi’s office to investigate why lenders who signed the settlement in February now appear to be shirking their duties. He said he and his wife have made three calls to Bondi’s office in recent months but were not encouraged by the results.

“They didn’t even seem to know what the settlement said,” Larson said.

mshanklin@tribune.com or 407-420-5538.