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(Source: Mark Davis The Kansas City Star, Mo.) – The $25 billion deal to help foreclosed and struggling homeowners on Thursday ran smack into the reality of carrying out the enormous undertaking.

Federal officials released pages of information, phone numbers and websites. State officials plotted public education sessions. Distressed homeowners phoned mortgage counselors.

The massive plan settles federal and state civil investigations into abuses by five big mortgage loan-processing companies handling foreclosures.

It also seeks to deliver $21.5 billion in aid for three classes of homeowners and $3.5 billion to states directly. The New York Times has reported that an additional $1 billion beyond the $25 billion will go to the Federal Housing Administration.

Mortgage relief will go to homeowners who owe more than their homes are worth and are current on payments, as well others who are similarly underwater but not current on their payments. Cash will go to former owners who lost their homes in foreclosures from the start of 2008 to the end of last year.

The question no one seemed able to resolve: Who qualifies for a slice of the pie?

“That’s what I’m trying to find the answer to,” said Ron Farmer, vice president of the nonprofit housing counseling group CHES Inc. in Kansas City.

Federal officials said details on how the plan would be implemented remained to be worked out. And, they said, don’t expect money to begin flowing soon. It will take months to identify those eligible for help.

Meanwhile, many struggling homeowners probably will confront a second question not addressed directly in the settlement: Who will lose their homes because of the settlement?

Many lenders have been holding off on foreclosures while investigators pursued the claims of lender abuses that produced the settlement. They’re now free to finish those foreclosures.

“It will unplug the clogged drain of foreclosures,” said Eduardo Martinez, a senior economist at Moody’s Analytics.

In any case, the best advice for homeowners is to be pro-active, said Missouri Attorney General Chris Koster, who is in charge of the state’s $196 million share of the settlement.

Kansas’ share provides $50 million in cash, mortgage relief and state funds under the settlement.

Both states have set up hotlines for residents to call for additional information and help.

In Missouri, call 855-870-7676. In Kansas, call 800-432-2310.

“We have extra staff set up, and we’re here to help them,” said Jeff Wagaman, deputy chief of staff for Kansas Attorney General Derek Schmidt.

Both offices emphasized that the lack of details reflected the early stages of the settlement, which was signed late Wednesday.

The settlement covers five banks — Bank of America, JPMorgan Chase & Co., Wells Fargo & Co., Citibank and Ally Financial, which formerly was called GMAC.

Collectively, they process loan payments and handle other work on mortgages, such as requests for a loan modification. The investigation targeted their treatment of borrowers that state and federal officials had called abusive.

Only homeowners whose loans are handled or owned by the five banks will qualify under the settlement. Negotiations to add more banks could boost the settlement to $45 billion and extend the benefits to more people.

The negotiations won’t cover homeowners whose loans are owned by either of the government-controlled mortgage giants Fannie Mae and Freddie Mac.

Government officials said the settlement did not prevent them from pursuing criminal prosecutions or bar individual homeowners’ from seeking their own claims against the banks. Koster, for example, said he will still pursue the charges against DocX LLC, a mortgage document-processing firm that was indicted last Friday along with its founder in Boone County.

In addition to providing aid to borrowers, the banks are committed to new standards for handling mortgages, including restrictions on foreclosures while borrowers are being considered for loan modifications. Borrowers also gain the right to appeal modification denials.

Negotiators divided the billions provided in the settlement into three piles for homeowners and set aside a fourth for the states.

For Missouri, it means the state will receive $31 million to provide cash payments to homeowners foreclosed on between Jan. 1, 2008, and Dec. 31, 2011. Koster said these payments of roughly $2,000 would essentially go out more or less automatically to homeowners.

The Kansas share for foreclosed owners is $8.2 million.

The largest portion of the settlement will go to homeowners who owe more than their houses are worth and have been unable to keep up with their payments. The banks are required to reduce the amounts owed by up to $17 billion and provide other loan modification relief.

The amount in Missouri is $86.5 million and in Kansas $15 million.

A smaller amount will allow homeowners who are underwater but current on their payments to refinance their loans at lower interest rates. Refinancing would reduce their payments, making the loans more affordable.

Missourians in this group could receive $38 million in benefits collectively. Kansans could receive $12.4 million in benefits.

The money, however, comes with a use-it-or-lose-it condition. It’s why states are keen to find qualified homeowners.

“If we don’t use it here in Missouri, our allotment could be used in Illinois or California,” Koster said.

Banks are committed to provide the relief over the next three years or face financial penalties for failing to deliver aid in a timely basis.

Homeowners, however, will have to be patient. The plan provides 30 to 60 days to select an administrator, who will spend six to nine months working with state officials and the banks to identify homeowners who are eligible.

Though the $25 billion is the largest civil settlement ever involving federal and state agents, it is dwarfed by America’s widespread housing nightmare.

Officials don’t know how many homeowners in each state will be found eligible for some of the allotment they receive. But the possible count is huge.

RealtyTrac, the leading researcher on housing, counted 214,650 Missouri homeowners who were “seriously underwater” last month. The measure means they owe at least 25 percent more money than their homes are worth.

Koster said the settlement did not include any threshold for how far underwater a homeowner must be to qualify for benefits.

Individuals who receive just $2,000 might feel less than whole because foreclosure paperwork — initiated after missed payments — was handled improperly and even illegally.

At the same time, resolving this much of the mortgage industry’s dark cloud could leave homeowners finally sensing that the housing crisis was bottoming out, said Tracy Turner, a Kansas State University economics professor.

“Also, most people would be comfortable with the idea that the companies that contributed to this problem will be taxed for their illegal behavior,” Turner said.

The Star’s Kevin Collison contributed to this report.

To reach Mark Davis, call 816-234-4372 or send email to

2012 The Kansas City Star (Kansas City, Mo.)

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Source: Mark Davis The Kansas City Star, Mo.