Some Oklahomans may be thankful their state crafted its own settlement with the nation's biggest banks over foreclosure practices following the housing bust.
The Sooner State, which settled with Bank of America, Citigroup, JPMorgan Chase, Wells Fargo and Ally Financial in February over those companies' handling of mortgages, issued the first compensation checks Monday to residents who lost their homes after lenders assured them their loans would be modified.
Oklahoma was the only state to opt out of a pact that attorneys general in 49 states struck with the five banks in February that will provide as much as $25 billion to distressed borrowers. The banks agreed to pay $18.6 million to settle claims of foreclosure abuse in Oklahoma.
Homeowners in Oklahoma stand to receive from $5,000 to $20,000 apiece under the settlement, according to the state. Borrowers whose states signed on to the national settlement would receive at least $840 if everyone eligible for compensation requests it, although the final amount likely will be higher, according to the national mortgage settlement administrator.
"There was a fair share of skeptics when we chose to make our own Oklahoma agreement apart from 49 other states, but we took what we learned from the 50-state investigation and created a plan that will help Oklahomans in a significant way," Oklahoma attorney general Scott Pruitt said in a news release.
Roughly 700 people in Oklahoma have applied for relief from the fund, which thus far has paid out an average of $11,000 per claim, according to the attorney general. The state said it expects to issue checks to recipients weekly through the end of January.
Under the national settlement, relief for borrowers also may take such forms as refinancing, principal forgiveness and short sales. The five lenders can obtain credit toward their national targets under the settlement by extending such concessions to borrowers in Oklahoma as well, according to the attorney general's office.
The banks reported in August that 138,000 consumers received roughly $10.6 billion in relief, or $76,615 each, including $8.7 billion in short sales, from March through June. Another 12,500 borrowers received roughly $1.1 billion in principal forgiveness. The settlement also obligates lenders to comply with more than 300 servicing standards that govern everything from loss-mitigation practices to proper communication with borrowers.
Both the Oklahoma and national settlements resolve claims that banks' handing of loans amid plunging property values following the economic downturn wronged borrowers who sought to modify their monthly payments.
Zach and Melissa Zuniga of Tulsa received a $20,000 check from the settlement fund. According to the attorney general, the Zuniga's bank told them a loan modification was possible, but later foreclosed on the house after telling the borrowers their loan was paid in full. Three days later they received information from their bank saying the bank wanted to help them avoid foreclosure.