Arizonans will divide up about $1.6 billion as the state's share of a nationwide mortgage fraud settlement with five major lenders.
The $26 billion national settlement absolves the five claims that banks acted improperly and illegally in dealing with homeowners who sought mortgage relief. The biggest chunk for Arizona -- about $1.3 billion -- will go to directly helping those who are underwater on their mortgages, owing more than the property is worth.
Attorney General Tom Horne said most of THAT has to be used to reduce the principal owed. But he adds there are other options.
"Facilitation of short sales which allows the house to be sold when the mortgage balance exceeds the value of the property, unemployment payment forbearance which will defer payments for homeowners who are between jobs, other options including relocation assistance for homeowners facing foreclosure, waiving of deficiency balances and funding for remediation of blighted properties."
The deal also means $110 million for those who already lost their homes in foreclosure due to lender misconduct, a figure Horne says should work out to about $2,000 apiece. And there is $85 million for interest rate reductions -- but not for everyone.
"The current interest rate to qualify for reduction must be at least 5.25 percent," said Horne. "I'm not sure it specified what the interest rate will go to. And it has to be at least a $100 reduction in monthly payment."
Horne said affected borrowers should start hearing from the lenders within weeks.