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Where's the National Mortgage Settlement Money?

PHOTO: Less than half of the $2.5 billion National Mortgage Settlement money, paid by banks to states, is being used for the purpose it was intended: to assist troubled homeowners and prevent foreclosures.
PHOTO: Less than half of the $2.5 billion National Mortgage Settlement money, paid by banks to states, is being used for the purpose it was intended: to assist troubled homeowners and prevent foreclosures.
October 19, 2012

EUGENE, Ore. – Less than half of the National Mortgage Settlement money – $2.5 billion paid to states by banks that had stretched or broken mortgage lending laws – is being used for the purpose it was intended: to assist troubled homeowners and prevent foreclosures. That's according to a new national report from Enterprise Community Partners.

Oregon got a bit more than $29 million in the settlement, and so far has used only one-fourth of it for housing counseling and legal aid.

Emily Reiman, OpportunityWorks manager at the Neighborhood Economic Development Corp. (Nedco), a Eugene-based housing counseling organization, says there's no slowdown in the number of people scrambling to hold onto their homes. What's surprising, she says, is the number who are what she calls "solidly middle-class."

"Because the economy has been in a recession for so long and unemployment has stayed high for so long, we're seeing those families use up their savings, go through their retirement funds - they're needing additional help to be able to stay in their home or figure out the way to exit the house with the least financial impact."

The rest of Oregon's mortgage settlement money, about $21 million, is controlled by the executive board of the State Emergency Fund, which does not have to use it for housing-related assistance.

In September, according to RealtyTrak, 969 foreclosures were listed in Oregon. And in October, Nedco is seeing the first mediation sessions under Oregon's new foreclosure reform law. The law has gotten off to a rocky start, with some saying the focus ought to be finding alternatives to foreclosure. But Reiman says lenders do now seem willing to get these issues resolved in other ways.

"We are seeing modifications come through a little bit more quickly than we did a year ago. That may be because lenders know that the mediation program is now in effect and they're more motivated to negotiate directly with the homeowners, to save themselves going to mediation."

The law requires that a mortgage company representative meet in person with struggling homeowners and a third-party mediator - and together, they can strike a deal to avoid foreclosure. Lenders and advocates for homeowners are working on improving the law and are expected to make some proposals to the legislature.

See the report, "States Fall Short on Help for Housing," here.

Chris Thomas, Public News Service - OR