Housing settlement called ‘just a beginning’

The $1.5 billion that Nevada homeowners stand to receive from the $25 billion foreclosure abuse settlement with the nation's five largest mortgage servicers "is just a beginning, and not an end," state Attorney General Catherine Cortez Masto said Friday.

"(We've) been dealt a losing hand with the economic downturn," Masto said at a news conference in Las Vegas. "We have the highest foreclosure rate in the country. This (settlement) will help thousands of Nevada homeowners."

Citing figures from Irvine, Calif.-based real estate researcher RealtyTrac, Masto said one in 16 homes in Nevada was "hit with a foreclosure" notice, a dramatic difference from the national figure of one in 69.

"The recession has devastated every corner of our state. ... Over 60 percent of homes in Nevada are underwater," Masto said.

Before signing, Masto said Nevada won separate promises from Bank of America to set aside $750 million to reduce principal and facilitate short sales.

Bank of America will pay $30 million for state consumer protection programs, while the state will receive another $60 million for those efforts through the multistate settlement.

She said the $90 million will pay for additional staff on a task force investigating mortgage fraud and will go to nonprofit organizations and legal aid firms to help struggling homeowners.

Masto, who initially balked at the settlement, said she signed on after reviewing the agreement to "make sure it delivered adequate and immediate consumer relief." Masto said she wanted immediate relief for homeowners, and thinks she got it.

Nasser Daneshvary, director for the Lied Institute for Real Estate Studies at the University of Nevada, Las Vegas, said Nevada did well in getting $1.5 billion in the multistate deal covering Bank of America, JP Morgan Chase & Co., Wells Fargo & Co., Citibank and Ally Financial.

Daneshvary said that Nevada, with about 1 percent of the nation's population, will receive about 6 percent of the settlement funds.

"More importantly than that, we haven't given up any rights and can still pursue criminal and civil investigations" against the banks, he said.

Many homeowners will see reductions in mortgage principal. In Nevada, those who endured foreclosures probably will see checks averaging from $1,500 to $2,000.

Masto said those checks would be a small part of her work, and that she's not finished investigating the mortgage industry.

But some people have criticized the relatively small amounts that will go to individual homeowners and former homeowners.

"It's going to have very little effect," said Jeremy Aguero, principal with the research firm Applied Analysis in Las Vegas.

Aguero said homeowners in Clark County have lost $91 billion, $112,000 per home, in equity during the past four years. He said the $1.5 billion settlement pales by comparison.

Nationwide, some 11 million homeowners are underwater. Of the $25 billion settlement, about $17 billion will go to writing down 1 million mortgages.

"Overall, it's too little and doesn't make a big deal," Daneshvary said. "It's because 50 percent to 70 percent of the mortgages are owned by the government, Fannie Mae and Freddie Mac."

While federally backed mortgages held by the two agencies were not covered by the settlements, Daneshvary said he is hopeful the two agencies will reach similar settlements.

Masto in 2010 subpoenaed Fannie Mae and Freddie Mac seeking details about their role in the foreclosure crisis. On Friday she said she will continue to investigate both of the mortgage underwriters.

"It's the first step to stabilizing this problem," Daneshvary said. "This problem is so huge that the feds, states and banks can't fix it on their own, there has to be a combination of the feds, states and banks."

He said the real estate market ultimately must correct itself to "stop the bleeding."

Masto stressed that the settlement will not prevent her office from pursuing additional cases against the five banks or curtail ongoing civil and criminal cases. She said her office is investigating 306 companies, which average 100 to 150 complaints per company.

Contact reporter Chris Sieroty at csieroty@reviewjournal.com or 702-477-3893.