Local Homeowners Applaud Mortgage Settlement

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CLEVELAND, Ohio --

A multi-billion dollar settlement between the government and the nation’s top mortgage lenders could help many struggling homeowners stay in their homes.

The $25 billion deal is between the federal government, 49 states including Ohio, and the nation’s top five mortgage lenders.

This is the largest settlement involving a single industry since the 1998 tobacco deal.  Homeowners Fox 8 News spoke to applaud the agreement, but say it’s only a start.

Thursday evening, struggling homeowners heard stories from people in their shoes, trying desperately to save their homes from foreclosure. It was during a meeting, sponsored by ESOP, a foreclosure-prevention counseling agency.

"I'm walking out of my house every day thinking, 'Do I have a home to come to when I get back?' " said Euclid resident Tony McNary.

"I couldn't believe my eyes that I had to appear in court for foreclosure," said homeowner Janine Smith.

They spoke of ongoing battles, working with their mortgage lenders to find a way to stay in their homes.

"Right now, all I'm paying is interest, and I'm not really paying my house down, so in 30 years, if I get to keep my house, in 30 years from now...I would've paid over 300-thousand dollars for a bungalow," McNary said.

The foreclosure deal struck Thursday applies to private mortgages held between 2008 and 2011.  It covers mortgages held by Bank of America, Wells Fargo, J-P Morgan Chase, Citigroup, and Ally Financial, formerly GMAC.

"In addition to addressing many of the most egregious mortgage loan servicing abuses that our investigations have uncovered, this agreement establishes significant new homeowner protections to help prevent future misconduct," said U.S. Attorney General Eric Holder.

"It will also provide immediate relief to homeowners, forcing banks to reduce principle on loans, refinance loans to underwater borrowers, and pay billions of dollars to states to be used for direct help to consumers struggling today," said U.S. HUD Secretary Shaun Donovan.

"It's a good first step, we've got a long way to go," said Mark Seifert, executive director of Empowering and Strengthening Ohio’s People (ESOP).

Seifert says banks need to focus more on helping homeowners lower their principle.  Seifert says even with a loan modification, a homeowner might still owe more than their home is worth.

"We can get interest rate reductions, we can get forebearance agreements, we can get term extensions...it's not helping people until we get at the root of the issue, the housing market is gonna continue to decay," he said.

The agreement does not apply to loans held by mortgage giants Freddie Mac or Fannie Mae.

Ohio Attorney General Mike Dewine also announced that some of the money will be used to tear down many vacant homes, which are causing property values in many communities to plummet.