About half of all Arizona mortgages are under water, meaning owners owe more than the property is worth. This proposal was aimed at helping those who continue to make payments rather than simply walk away. It is a bit complex, involving the state using its power of eminent domain to acquire the property, paying the bank the current market value with money from investors who buy state bonds, and giving the lender a no-interest promissory note for the balance. That buys the homeowner some time for the market to recover.
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.