For America's hard-hit homeowners, little relief from settlement

Crystal Morello’s family pleaded for months with their lender for a cheaper mortgage on their family home in Belleville Michigan. But time ran out last summer and they left before they were evicted.

The bank was reassuring us that it was helping us out says Morello 26. While we were getting a loan modification in one department we were getting foreclosed in another.

Nothing will get Morello back to the house she lived in since she was three certainly not the small part her family might receive of a record 25 billion settlement announced Thursday between the government and five big U.S. banks accused of abusive mortgage practices.

Checks of up to 2000 each are expected to reach 750000 households who lost homes through the foreclosure process between 2008 and 2011.

As part of the deal the banks also agreed to cut the amount of principal owed by homeowners and provide lowerinterest rate loans to the tune of 17 billion for borrowers who are behind on their payments and who are at risk of foreclosure.

A further 3 billion is on tap to help homeowners who are current on their mortgages but are unable to refinance because they owe more than their homes are worth.

Critics of Thursday’s agreement like Margaret Becker director of the homeowner defense project at Staten Island Legal Services in New York say the deal is paltry at best.

I don’t think it’s going to have a lot of meaning for consumers she says. The 25 billion settlement is a miniscule amount of money and doesn’t begin to approach the banks’ legal liability for the fraud.

New York state alone has 250000 mortgages that are in foreclosure or more than 60 days late Becker noted.

An estimated 10.7 million U.S. borrowers or 22.1 percent of all borrowers are ‘underwater’ according to Corelogic a company that tracks real estate data.

They are believed to owe 700 billion more than their houses are worth as a result of the crash in U.S. housing prices.

Thursday’s agreement paves the way for the process of deciding which homeowners qualify for the 25 billion and many hurdles remain.

Borrowers have to be behind on their payments and in most cases the loans have to be owned by the banks. Homeowners with mortgages held by staterun U.S. housing finance giants Fannie Mae and Freddie Mac are not eligible.

Even those who stand to benefit from the settlement aren’t convinced it will work. Some like Roger Duke 41 plan to remain in the courts. We’ve given up altogether on modifications says Duke 41 whose Wellington Florida home is in foreclosure. We’ve tried everything the government has put out.

When Duke a sales manager at an industrial firm purchased his home in 2005 he never imagined its value would plummet to 230000 from 420000. But Duke’s problems began almost immediately when he tried to refinance an adjustablerate mortgage. One battle lead to another as the original lender fell into bankruptcy and the loan papers went missing.

Our case is a perfect example of what is wrong with any kind of settlement because people need to go to jail for something like this he says. It’s been a nightmare but we’re in it for the long haul.

In the meantime people like Kathleen Dalton wait worry and hope their banks will also settle with the government.

Dalton who once owned her own insurance business has spent the last three years battling for a permanent loan modification for her West Palm Beach Florida condominium which has dropped in value to 50000 from 100000.

Most recently the lender sent her an offer for a temporary modification at a higher rate than her original mortgage with no terms nor explanation.

I just want to save my home says Dalton 61. I hope that’s going to happen but I don’t know because I’ve had my hopes go through the roof and then let down so many times that it’s affected me physically.

For borrowers like Morello the settlement is too little too late. While it’s up to her parents her family likely would use any money they get to repair the roof of the 1940s bungalow they purchased in Dearborn Heights Michigan for 10000 by pooling cash. Morello now lives there with her twoyearold daughter her parents a cousin a dog and a cat.

I’ll never get a mortgage again for any reason Morello says.

Additional reporting by Margaret Chadbourn Editing by Richard Pullin

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