More than 14,000 consumers in Cuyahoga County are eligible for a piece of this month's $8.5 billion national foreclosure settlement.
But U.S. Sen. Sherrod Brown on Thursday said the settlement, which could mean an average of $2,125 in payments and loan modifications per homeowner, isn't good enough.
First, it's not right that banks can pay out these settlements -- which were brought on largely by foreclosures that banks pursued improperly - and then take a tax deduction for the amount paid out, said Brown, Democrat of Ohio.
"That means taxpayers . . . get to pay even more for this," he said. Brown sent a letter Thursday to Federal Reserve Chairman Ben Bernanke and Comptroller of the Currency Thomas Curry, asking them to prohibit banks from deducting these payouts and all such settlements as business expenses.
Outside of Cuyahoga, nearly 5,000 foreclosed-on homeowners in Summit are eligible for payouts. Another 11,200 are eligible in Ashtabula, Geauga, Lake, Lorain, Medina, Portage and Stark counties.
Most of the improper foreclosures were driven by what Brown called "Wall Street greed" as well as some mistakes made honestly by the banks, but that they refuse to fix.
Second, banks should not be able to foreclose on a family first and then ask questions later, he said. Hundreds of thousands of homeowners nationwide have gotten ensnared in the red tape and legal nightmare of foreclosure and find it nearly impossible to get out, no matter what.
Carla Martin is one of them. The Cleveland Heights mother of three, introduced by Brown Thursday, lost her job as a graphic designer in 2008 and got behind on her mortgage in 2009.
She applied for a loan modification three times through Bank of America, but the bank kept losing her paperwork, she said.
"I did what I should have done. I fought for my house," said Martin, 55. "It seemed like they weren't even interested in working with me."
Martin said Bank of America filed for foreclosure three times and each time it has been dismissed because the bank didn't have proper documentation that it even owned her loan. She originally took her loan out through KeyCorp and it was eventually sold to Bank of America.
While she thinks she still owns the Cleveland Heights property and uses it as her permanent address, she doesn't live there because she sold all of her furniture and belongings when she thought she would be kicked out. "I'm just waiting for them to sue me again," she said.
The local foreclosure crisis has been on the
radar of consumer watchdogs, economists, government officials and
regulators for years.
Ohio was at one time considered ground-zero for the foreclosure crisis and has remained in the top seven states with the worst foreclosure and delinquency problems. As of last year, about one in seven mortgages in the state is delinquent or in foreclosure. Among
those who have been concerned about foreclosures: the National Consumer
Law Center, the Legal Aid Society and the attorney general's office in
Ohio and nearly every other state. A 2011 study by the Federal
Reserve Bank of Cleveland found that foreclosed homes in Cuyahoga County
are more likely to remain vacant up
to five years after they're sold compared with homes sold by traditional
means. A researcher examined sales records and U.S. Postal
Service vacancy rates from 2006 through 2010. Among foreclosed homes,
22 percent are vacant five years after their
last sale, compared with 10 percent of homes not foreclosed on, the
study found. It's easy to see why large concentrations of
foreclosures destroy neighborhoods and why communities are so upset
about the share of foreclosures that should have never been. Instead,
they were pushed through by bureaucratic errors or an overzealous bank.
Brown noted that foreclosures hurt not just the families involved, but also the broader community hit by vacant homes and declining property values. The system needs to be changed, he said. That's why he's pushing for the Foreclosure Fraud and Homeowner Abuse Prevention Act, which would broaden foreclosure prevention help and increase protections for homeowners and investors in mortgage investments.
Despite the settlement, "the issue is hardly settled," he said.
Announced last week, the settlement covers 4 million homeowners nationwide who were foreclosed on in 2009 or 2010, including an estimated 96,000 Ohioans. The agreement with 10 banks and mortgage servicers includes several lenders that did business in Northeast Ohio, including PNC, Citibank, U.S. Bank, JPMorgan Chase and Bank of America.
The foreclosure scandal erupted in 2011 after it was discovered that many banks used a tactic called "robo-signing" and foreclosed on people without reviewing their cases or reading the court documents.
To reach this Plain Dealer reporter:
tmurray@plaind.com
On Twitter: @teresamurray
