W.Va. mortgage victims might get more than $2,000

By Chris Dickerson | Mar 22, 2012



CHARLESTON – Chief Deputy Attorney General Fran Hughes said West Virginia residents who were affected by the recent multistate mortgage settlement might see more than $2,000.

State attorneys general, federal officials and the country's five largest mortgage servicers reached a $25 billion settlement. West Virginia is set to receive about $33 million of that money. Of that, an immediate estimated payment of $2,000 will go to each state homeowner who lost his or her home to foreclosure between Jan. 1, 2008 and Dec. 31, 2011.

Also, more than $18 million will go to loan modifications and benefits to state homeowners currently in default or foreclosure. And more than $5 million will go to free refinancing for "underwater" homeowners -- that is, those who are still current on their payments but are struggling. Another $6 million will go to foreclosure and mortgage assistance and prevention programs in the state.

On Tuesday, Hughes said $1 million of the money will go for Legal Aid West Virginia to do home mortgage modifications.

"We have what we call a SWAT team of people going directly into the communities for this," she said. "We're going into community centers, bringing equipment and helping you do a modification there on the spot. We're going to help people get all of this stuff ready to try to expedite a response to the modification request."

Hughes said that, depending on circumstances, the AGs office hopes to give affected homeowners a little bonus in addition to the $2,000 promised in the settlement.

"We hope to give the rest back to people who have lost their homes, to supplement the $2,000," Hughes said. "As of right now, we haven't been given the final tally of exactly how much money the state will get. But we're planning to supplement the homeowners. We're hoping to, anyway."

Hughes said the efforts on this project right now are focusing on Kanawha, Putnam and other large counties as well as the eastern Panhandle.

"That's where most of the mortgage problems are," she said, adding that the AGs office soon will set up a satellite office in the eastern Panhandle.

"We'll have a lawyer from legal services in the office," she said. "We're using some of the mortgage settlement money for that because there are so many mortgage issues over there, and they need a satellite office.

"We're hoping by April 1 to have the office up and running. Mortgage money is paying for this. We haven't configured the whole office yet, but we plan on rotating staff there. We'll have paralegals, a secretary, a lawyer or two. One person working with us from Legal Aid will be operating out of that office. We'll have different lawyers there from our Consumer Protection Division. We're not going to hire one person and leave him or her there."

Earlier this month, Attorney General Darrell McGraw and Assistant AG Heather Connolly talked about the mortgage settlement on "The Law Works" on West Virginia PBS.

"We reviewed the claims and the investigations, and found out that the banks were wrong and that they were going to pay," Connolly said. "But it's not a perfect settlement."

Connolly said she found that in most, if not all, cases, it was not that homeowners bought too much home.

"The value simply went down, or they experienced some sort of financial hardship," she said. "That's the beauty of this settlement. As long as you can show the ability to pay, you don't have to pay for a refinance and banks can't consider that negative equity against you when refinancing."

McGraw said the multistate settlement -- which only covers those mortgages held by the five banks, not Fannie Mae or Freddie Mac -- is not a "get out of jail free" card for the banks.

The agreement institutes new protections for homeowners and nationwide reforms to mortgage servicing standards.

"The banks treated those customers who needed modification very badly," Connolly said.

She explained that when the banks received bailout money from the federal government in 2008, they were required to consider applicants for loan modification.

"Quite frankly, it was a horrendous mess," she said. "There was no borrower's bill of rights, documents were lost and you never talked to the same person twice."

Basically, the government bailed out the banks, but the banks refused to bail out borrowers, she said.

"Some people were helped, but not many. Maybe less than half," Connolly said.

McGraw noted that of the 5 million homeowners who qualified for modification, only about 1 million actually received some type of relief.

Both Connolly and McGraw said they can't figure out why the banks, who are in the business of selling money and not selling real estate, wouldn't have made more of an effort to modify borrowers' loans.

"It just didn't make good business sense," Connolly said. "It's something we're all still scratching our heads as to why."

However, the settlement still leaves the door open for tough legal remedies for mortgage-related misconduct.

"It's not addressing everything and every wrong that happened with the housing financial crisis," McGraw said. "If there are other mistakes or misdirection in the loan process, you're not giving up your rights."

Typically, when an individual receives money in a settlement he or she would have to release all claims against that company.

"No personal causes of action are released, period," McGraw said.

Individuals still have the right, in this case, to hire an attorney and take action against one of the banks, he said.

"With the housing crisis precipitating three or four years ago, now, the attorneys general were frustrated and angry because of all the fragmentation that existed," McGraw said. "So we decided to band together to do a national program."

The attorney general said it was necessary to recruit the federal government, including the Department of Justice and Department of Housing and Urban Development, because four of the five banks are considered nationally chartered banks.

"And state attorneys general have no jurisdiction over nationally chartered banks," he explained.

The probe began in October 2010 with inquiries into so-called "robosigning" practices.

Later, it broadened into identifying and addressing additional alleged improper foreclosure practices.

Connolly explained that foreclosure documents, which required notarized affidavits, were instead being falsified by the banks.

"The number of foreclosures was so great, the banks couldn't keep up," she said.

Some were simply stamping signatures, she said.

Though most states -- called judicial foreclosure states -- require such documents before foreclosing, West Virginia is not one of them, Connolly noted.

West Virginia is a deed of trust state.

"You're not entering into a mortgage but a deed of trust," she said. "Basically, if you default on your loan, the bank can auction it off on the courthouse steps."

Ringer explained that a deed of trust means that the bank holds the title in trust so long as the homeowner pays his or her bill.

"They own your property and hold it for you as long as you pay your debt. If you stop doing that, there are some notice requirements, but then they can auction it off," Connolly said.

"It's a pretty easy process for them. There are some protections, of course, but it's still a pretty easy process."

For more information on the settlement or to obtain forms to make a claim, contact the Attorney General's Office at 1-800-368-8808 or visit the office's website, www.wvago.gov.

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