The massive mortgage settlement may be setting new national standards for loan servicing, but it may be too little and too late to help troubled homeowners.
Many homeowners will see reductions in the principal they owe on their mortgages. In California, those who endured foreclosure probably will see checks averaging $1,500 to $2,000.
"It's a form of very rough justice," said Paul Leonard, director of the Center for Responsible Lending's California office. "There's really no screening to determine whether these were wrongful foreclosures; they're going to give something to everybody regardless of the circumstances."
But to underwater homeowners such as Samuel Guzman, whose three-bedroom Westminster home was foreclosed in August, it's all "too little too late."
"It's not going to solve the problem," said the hairdresser, who along with four family members is trying to avoid eviction. "It's not going to make things right."
Guzman, 61, bought the home in 2001 for $211,000. When he added a room several years later, he took out a risky, adjustable-rate loan, which he quickly realized was "a balloon that was going to explode."
But he was locked in. By mid-2009, he was running behind on payments. Wells Fargo Co. rejected his loan modification application five times, he said. Guzman said he tried to pay off some of his $500,000 debt with a Treasury bill, which he said Wells Fargo declined.
He hired a lawyer. No luck: The bank foreclosed on the home in August and began threatening eviction.
So in December, Guzman filed for bankruptcy as "a kind of hail Mary to keep from being locked out." He's put "No Trespassing" signs in front of the property in an attempt to keep authorities away.
But just in case, he's slowly clearing out his furniture.
"Right now, I'm on my last leg," he said. "I've done everything I can. I'm just waiting for somebody to crush me."
The sentiment was echoed outside a downtown Los Angeles building where California Atty. Gen. Kamala D. Harris announced the state's role in the settlement. About 100 Occupy L.A. activists assembled to deride the deal, calling the government a "sell-out" that lets banks "off the hook."
Real estate consultants Gayle and Ceara Threets lost four Bay Area homes — three to foreclosure and one to a short sale — when the recession hit. The couple, whose decimated credit now forces them to rent, said the settlement should have included provisions to help foreclosed homeowners repair their credit faster.
"People have already lost their homes — you can't replace that," said Ceara, 37. "The thing that would really help is if there was a way for homeowners who have lost their homes to come back to the market faster instead of having to wait."
Like many other struggling homeowners, the couple said they had been up to date on payments until the recession hit. Three of their properties were rental units. They said they were proactive about calling Washington Mutual — since taken over by JPMorgan Chase & Co. — about their options before they began to fall behind.
But the bank, the Threetses said, wouldn't talk to them until their homes were underwater. So it only makes sense for mortgage servicers to give such home buyers a second chance, they said.
"These are people who entered the market with 700 credit scores, who were and still are very responsible," said Gayle, 41. "It took a whole collapse of the system to make them fall delinquent."
It took another, well-publicized Occupy protest last month to get Bank of America to offer to work on Virginia Hosking's loan — just as the bank was kicking her out of her foreclosed Whittier house, she said.
Hosking, 55, had participated in the protest to vent her frustration with the bank. After her husband died in 2010, the institution refused to let Hosking replace his name on their modified loan with that of her son, she said.
Bank of America then stopped accepting her payments and told her she no longer qualified for the modified loan, she said. Hosking, who lost her job as a security guard in November 2010, was told that she owed $34,000 immediately on her home of 30 years — a number that failed to factor in the $14,400 she had paid over the past year, she said.
Unable to pay, she was forced to move. After she showed up in local news coverage of the Occupy protest, Bank of America said it would help refinance her loan — but only after she landed a job, she said.
Thursday's settlement, she said, offers a mere pittance.
"Look at what it's cost me, the emotions I've had to go through," said Hosking, who said she's lost 25 pounds since August. "They want to give me $2,000? That's nowhere near enough. Why would they think they could buy their way out of this?"
Also upset are veterans such as Roland Yee, 45, who began falling behind on his mortgage payments three months ago and received a foreclosure notice from his bank not long afterward. But because he has a Department of Veterans Affairs loan, which along with loans from the Federal Housing Administration, Fannie Mae and Freddie Mac are not included in the settlement, he's excluded from the benefits of Thursday's deal.
The settlement covers only about 10% of all the mortgages in the country, according to the Neighborhood Assistance Corp. of America.
"I know the economy's bad," said Yee, a Desert Storm veteran and Corona resident. "But it's upsetting that the government would implement all these different funds, but I'm not able to get any of it. It could have lowered my principal and interest and made it affordable."
Since the recession hit, his wife has lost her teaching position and Yee's construction work has been spotty. The family tore through its savings to keep paying the mortgage and is now "struggling to keep the lights on" with $9,000 in debt, he said.
"We're not asking for them to take the payments away," he said. "We just want help, to get to a clean slate again."