New Jersey and residents damaged by the foreclosure crisis would receive an estimated $838 million from a $26 billion national settlement among the states and five major lenders.
But the individual amounts will be pennies on the dollars -- at most.
The largest chunk would be a projected $660 million for embattled homeowners trying to stave off foreclosure by one of the five big banks: Ally Financial (the former GMAC), Bank of America, Citibank, JP Morgan Chase, and Wells Fargo.
New Jersey's total is the seventh highest amount among participating states, according to figures released by state Attorney General Jeffrey Chiesa. The amount could grow if other lenders sign onto the settlement.
In return, the participating lenders will be protected from significant legal fallout after a period of widespread fraud in mortgage and foreclosure practices. Every state but Oklahoma already has signed on, according to U.S. Attorney General Eric Holder.
New Jersey officials joined other political leaders and the banks in hailing the settlement. The deal, reached after months of closed-door jawboning among the states, lenders, and the Obama administration, "will bring much-needed relief to New Jersey borrowers, and significant reform to the mortgage servicing industry," Chiesa said in a statement.
Tom Considine, the state commissioner of banking and insurance, called the deal "a step forward for consumers." He added that it will produce "a healthier marketplace" for mortgage servicers.
The list of state settlement amounts can be viewed.
Outside official circles, though, the agreement ignited widespread skepticism. David Stockman, a former budget director for President Ronald Reagan, called it "crony socialism" for the banks.
On the progressive, former Assistant U.S. Attorney Cynthia Kouril said the deal means the court system will be "permanently corrupted by forged and perjurious documents" filed by some lenders as part of mortgage and foreclosure cases.
Nationwide, home mortgages are "underwater" by an estimated $700 billion, with affected owners owing an average of $50,000 more than their properties are worth. As described by authorities, the top amount any homeowner would receive is likely to be $20,000, and many would get no help.
For those who can demonstrate that they lost homes over the past four years due to abuses in foreclosures, payouts would be in the $1,800 to $2,000 range.
In New Jersey, some worry that the deal means more dire news for the housing market, at least over the next few years. After delays caused by moratoriums, investigations, legal proceedings, and the negotiations, officials continue to estimate that lenders are ready to file 50,000 to 100,000 new foreclosure cases.
The state court system has budgeted for additional clerk help to handle the expect surge. The total number of cases is the second-highest in the nation behind Florida, a state where previous foreclosures, some perpetrated by fraud and false swearing, have devastated large swaths of some communities.
"Definitely, we're not looking for more people to be put out of their homes," said Assemblyman Jerry Green (D-Union). "Our number one goal should be looking out for the people who are in those homes now."
Otherwise, he said, the result could be "families being put out on the street and more properties sitting empty." Green said he is working with state Sen. Raymond Lesniak (D-Union) to direct affordable housing money toward homes in foreclosure.
While he declined to discuss details until Gov. Chris Christie and others endorse the plan, Green said since foreclosures affect communities across the state, so should housing policy.
Chiesa spokesman Lee Moore said that for those who qualify, the settlement "will provide opportunities for borrowers that are subject of a pending foreclosure action to potentially negotiate with their bank" to remain in their homes.
The Trenton area shows the biggest price discrepancy in the nation between homes in foreclosure or already owned by banks and those that come onto the market through normal sales, according to RealtyTrac.
Sales figures from the third quarter of 2011 show Trenton and Ewing Township were among 11 areas nationwide where foreclosed homes went for less than half as much as other properties, according to the Irvine, Calif., real-estate data firm. But the gap here was 68 percent, compared to about 54 percent in second-place St, Louis, RealtyTrac found.
Still, bank-owned homes and those in foreclosure went for $108,302 in the Trenton area, while those in the St, Louis region, Saginaw, Toledo, Memphis, and Milwaukee were all under $100,000.
Foreclosure numbers explained the slowness of some key states to agree to the deal. Of the 10 markets where bank-owned homes and those in foreclosure account for more than half of current housing sales, nine are in California, led by Modesto at 66 percent. The exception is Las Vegas, at 60 percent.
California and New York only accepted the deal after heavy behind-the-scenes lobbying by the Obama Administration. The President appointed New York Attorney General Eric Schneiderman to a small task force to investigate foreclosure problems. Californians would get about $16.5 billion in loan modifications and restitution for foreclosure fraud.
The deal would exempt the big banks from penalties for fraud and false swearing, the so-called robo-signing of documents by lenders that did not actually hold the notes required to foreclose. Those have sparked the most legal actions and investigations of the banks.
The extent of the fraud problem is unknown in New Jersey, where 95 percent of foreclosures have been uncontested. Citing that in December 2010, state Chief Justice Stuart Rabner imposed a moratorium on foreclosures by six major lenders -- the five in the deal plus OneWest Bank -- until they demonstrated to a court-appointed master that they strengthened their foreclosure safeguards.
Rabner's order, which also required improvements from two dozen smaller lenders, followed depositions and testimony in cases here and around the nation. Some showed employees and officials of lenders and loan servicers routinely signed scores or hundreds of foreclosure documents without possessing the notes.
Official descriptions of the settlement indicate it will allow Schneiderman and other attorneys general to pursue the other half of the fraud equation: the packaging and sale of substandard mortgage notes as safe investment securities, whose failure caused Wall Street to crash before the federal bailout of the financial sector.
Analyst Yves Smith of Naked Capitalism said any mortgage principal writedowns for borrowers are "guaranteed" to come from these already securitized loans. He estimated the settlement will provide $5 billion from the banks, but the remaining $21 billion will be value lost to private and public investors, including state pension funds.
That outcome would leave taxpayers ultimately on the hook, unless the state and federal governments vigorously step up their enforcement and restitution actions. But the timing of the deal effectively cuts off some lines of inquiry for the Obama task force.
Despite such qualms, Chiesa said New Jersey will benefit from the settlement in several "important ways:"
the estimated $660 million in benefits from loan term modifications and other direct relief;
$12.5 million in cash payments for those who were abused by mortgage servers and lost their homes to foreclosure between January 1, 2008 and December 31, 2011;
an estimated $89.5 million in loan refinancing for some borrowers whose loans are underwater;
$75.5 million in direct payments to the state for housing programs.
To apply for restitution, borrowers who lost their homes between January 1, 2008 and December 31, 2011, must submit certifications to a claims administrator. Nationally, almost 4 million Americans lost property through foreclosure in that period.
While New Jersey and other participating states have dropped any claims against the five big banks over home loan origination and servicing, that does not prevent homeowners who contest foreclosures from challenging the validity of documents, according to the Attorney General's office.
Since the banks have agreed to the appointment of an independent monitor, and a consent order memorializing the settlement must be filed and accepted in federal court, "the states will have the ability to enforce the banks' obligations," Moore said via e-mail.
The settlement announcement listed telephone numbers for borrowers seeking information from their lenders: