From the Daily Record:
New Jersey’s share of the $25 billion mortgage settlement announced Thursday is expected to bring financial relief to at least some of the state’s homeowners who are facing foreclosure or owe more than their homes are worth, analysts said.
For homeowners in that category, though, it’s no slam dunk. Banks still will need to be relatively assured that homeowners can make their modified mortgage payments, they said.
Homeowners “have a better chance,” said Patrick J. O’Keefe, director of economic research for J.H. Cohn, an accounting firm based in Roseland. “But this is a partial solution.”
The U.S. government and 49 state attorneys general, including New Jersey, reached an agreement with the nation’s five biggest mortgage lenders – Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co., Citigroup Inc., and Ally Financial Inc. – to settle charges that the companies cut corners to foreclose on homes and deceived customers about loan modifications.
With the government unable to solve the puzzle, prices have declined so much that 310,000 homeowners in New Jersey – about 16 percent – owe more than their homes are worth, according to Jeffrey Otteau, president of the Otteau Valuation Group in East Brunswick.
New Jersey is in line to receive $837.7 million, state Attorney General Jeffrey S. Chiesa said. That money will be used to modify and refinance loans. It will go to pay for borrowers who “suffered servicing abuse” and were foreclosed on. And it will help pay for state housing programs.
The settlement affects only customers whose mortgages are owned and serviced by the five companies in the agreement. It’s an important distinction because the companies might have sold some mortgages to Fannie Mae and Freddie Mac, government-backed companies whose customers aren’t part of the agreement.
It isn’t clear how many New Jersey homeowners would qualify, but the five companies represent 60 percent of the industry, the state said.
The program, because of its complexity, could take three years to complete, the state said.
How much of a difference will it make? Observers were torn.
“It might need $1 trillion to really solve the problem, but maybe this will be enough to take people in the process of foreclosure … start to make performing loans,” said Joel Greenberg, chief executive officer of Novadebt, a Freehold Township credit counselor. “That’s got to help the situation, but it’s still the middle of a crisis. I don’t see this whole logjam breaking immediately.”