N.H. Eyes Blockbuster Bank Deal

Good news could be on the horizon for New Hampshire homeowners with mortgage troubles.

Later this week, the state may sign onto a multi-billion dollar settlement with the nation’s five largest banks over past foreclosure abuses.

More than 40 states are negotiating with the country’s top banks to reduce principal and in some cases refinance mortgages.

Nationwide, the deal could be worth up to $25 billion, depending on which states ultimately join this lawsuit.

Here in New Hampshire, Senior Assistant Attorney General James Boffetti said the settlement could mean tens of millions of dollars.

“This proposal offers the possibility of real assistance that would keep people in their homes,” said Boffetti.

The deal hasn’t been finalized and New Hampshire Attorney General Michael Delaney has yet to announce whether he’s joining the lawsuit

Here are the basics of the proposed deal.

The five largest banks – Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial – would provide billions in foreclosure aid to their customers.

In exchange for the money, states would not bring civil lawsuits against the 5 banks problems with mortgage origination, servicing and foreclosure practices. States could still pursue criminal charges.

This, of course, isn’t the first time that banks have been urged to rewrite some of their loans. But Boffetti says unlike several previous federal programs, this contract is a legal agreement and one with bite.

“If they don’t do it, there are severe penalties the banks would have to pay," he said, adding that the banks have a significant financial incentive to "actually do what they are saying they are going to do in the agreement.”

There are already signs that banks are moving towards compliance. Banking Commissioner Ron Wilbur says he’s already sat down with one of the banks– one he doesn’t regulate – to talk.

“They describe a number of initiatives they are implementing now," Boffetti said. "They have plans to do something more specific in the state of New Hampshire. I think this is an indication of them becoming geared up for their new found obligations.”

At this point, it’s too soon to know what this deal might be worth to the average homeowner with mortgage trouble in New Hampshire.

National estimates suggest people who lost their homes between 2008 and 2011 would get about $2,000. Experts project banks will write off about $20,000 from the principal of an original mortgage.

Dean Christon heads up the New Hampshire Housing Finance Authority. He says that reduction would help some borrowers.

“That will help people a bit but frankly, $20,000 is not enough of a dramatic reduction in principal to save someone who is on the edge of foreclosure," Christon said. "What it more likely will do is help people who are under stress, people who are perhaps burning through their reserves.”

New Hampshire expects about 3,500 foreclosures this year. Christon thinks this settlement agreement could cut that number by about 1,000.

Perhaps the biggest impact of this proposed deal is how it could help people like Taramarie Meehan.

“I live in Moultonborough, New Hampshire," Meehan said. "I have a loan with Bank of America. I am not very happy with them.”

Meehan is one of about 11 million homeowners nationwide whose owe more on the mortgage than the house is worth. And she’s facing foreclosure.

For the past three and a half months she’s been in constant talks with her mortgage holder – Bank of America – to work out some kind of arrangement. Even with all of the complicated and confusing paperwork, Meehan should  know how far behind she is on her mortgage. She doesn't.

“I think it’s somewhere around $11,000 dollars," she said. "But they did not give me a hard and fast number. And when I ask again, I get, ‘oh, we’ll get back to you.”

Meehan, like many Americans over the past few years is trapped in a terrifying dance with her mortgage lender. The bank asks for documents. She faxes them in. And then the bank asks for more documents. Meehan faxes them in. And the cycle repeats itself again and again. “When the clock is ticking, for a date they are going to sell your house...time is of the essence,” she said.

The proposed deal would require banks to stop some of these practices – making it easier for people like Meehan to find a way to stay in her home. And if the banks don’t make certain improvements in customer service, states could take the banks to court. The state may announce its decision on whether to join the lawsuit later this week.