Nevadans scrutinize $25 billion foreclosure settlement
A foreclosure sign is seen in front of a bank-owned home for sale in Las Vegas, Nev.
Kai Ryssdal: The Department of Housing and Urban Development did well for itself in the president's budget today. If it passes, HUD would get a 3 percent increase next year over this one. Some of that would go to mortgage and foreclosure relief. Bundle that in with the $25 billion deal big banks made with state and federal regulators last week and good things might start to happen. We've heard from analysts and regulators about it, and Friday on this program Shaun Donovan, the secretary of Housing and Urban Development.
You know who we haven't heard from much? Regular people. Nevada Public Radio's Adam Burke takes care of that.
Adam Burke: One guy in Las Vegas who's followed the settlement proceedings closely is Michael Joe. He's an attorney with the Nevada Legal Aid Center. He says states gave up a lot to reach an agreement.
Michael Joe: I do think it was big concession. I think the banks were really worried about it, cause the wrongs they did are enormous.
Just about every day, Michael Joe works with frustrated homeowners who have little leverage with banks, and who've lost tons of equity.
Joe: I mean, if we talk about the numbers of people who are underwater, and the amount that people have lost in values of homes, you know that's a huge number. $25 billion is just a small drop in the bucket.
For every 10 homeowners in Nevada, six owe more than their homes are worth. Nevada's slice of the settlement pie was better than many states. And yet on Friday, at a press conference in Las Vegas, state Attorney General Catherine Cortez-Masto had to defend herself.
Catherine Cortez-Masto: This was not an easy decision to make, but at the same time for my purposes it was all about homeowner relief. If I could get them some relief in some fashion, no matter what it looked like, I couldn't ignore that.
Breaking it down, Cortez-Masto said some people who lost homes to foreclosure during the housing crash will get about $2000 each. The settlement also has a chunk of money to reduce the principal on underwater home loans. She says this is the only the beginning of legal action against banks.
Cortez-Masto: If I lost my home I'd want those banks to be held accountable. And we are not stopping our litigation and our investigation into these banks.
It's a tough sell to many Las Vegas residents. Yesterday, outside a library in an upscale suburb, Kathy McIntosh, Scott Waid, and Spencer Wren echoed the cynicism and outrage that many feel.
Kathy McIntosh: I don't think that the people that lost their homes will ever see any of the money.
Scott Waid: It's a slap on the wrist to the banks for the true damage that has been done.
Spencer Wren: And for them to get out of any civil liability is simply ridiculous.
But attorney Michal Joe says, for a narrow slice of Nevadans, the principal reduction part of the deal is promising. It could drop the principal on some mortgages to near market value.
Joe: The good thing about this settlement is that for those people who are going to get principal reduction, they're going to be in decent shape afterwards.
Michael Joe estimates there's only money enough to help around 10,000 Nevadans with principal reduction. But banks will have some flexibility in how they disperse funds nationwide. So, he says, those who can, should jump on board early to qualify.
Joe: My concern is, in Nevada, that if we're going to get $800 million in principal reduction, that we really get it. I'm concerned that we're not going to get our fair share.
So what about the people who might be eligible for a principal reduction from their banks? I met one yesterday -- Mezlekia Tebebe. He bought his home in 2006 when Las Vegas was booming.
Mezlekia Tebebe: There was waiting list to get the house, I didn't even know that I was getting it or not. The builder called me, 'OK, your name is up. We have this house for you.' We were on waiting list.
Now Tebebe's house is worth less than half of what he owes on it.
Tebebe: My house is currently underwater by $245,000.
Tebebe is a bellman at a casino; his wife is a cosmetologist. They want to stay in their home but only if they can reach a deal with the bank. Since the lender is Chase Bank, Tebebe could qualify for a principal reduction under the settlement.
Tebebe: I like the settlement, it's a good start. At least it'll bring some kind of relief for some homeowners.
Burke: Have you thought about what you'll do if there isn't a remedy?
Tebebe: Well short sale, or just walk away, that's the only way that I see for myself.
In Las Vegas, I'm Adam Burke for Marketplace.