When Montana received nearly $6 million from a $25 billion national settlement with the nation’s five largest banks – a result of their shady mortgage practices – the state tucked away its share of the funding to help homeowners address the threat of foreclosure.
Fifteen months later, the Office of Consumer Protection in the Montana Attorney General’s Office says the program, known as Save My Montana Home, is working well, even if it’s not yet widely known and foreclosure notices continue at an even pace.
“We deal with situations all the time, but our number of successes keeps going up,” said Chuck Munson, assistant attorney general in the Office of Consumer Protection. “These successes come out of a pretty dark place. We’re hoping to have a living document out in the next few weeks that has a list of our family success stories.”
In early 2012, Gov. Steve Bullock, serving as Montana’s attorney general at the time, joined 49 other states in the landmark $25 billion settlement with Bank of America, JP Morgan Chase & Co., Citibank, Wells Fargo and GMAC.
It was the second largest settlement ever reached outside the 1998 deal made with tobacco companies, and it gave states an opportunity to establish programs for struggling homeowners who’d borrowed from one of the five banks.
“A lot of states in the country have had budget shortfalls – they’re operating in the red – and the money they received from the settlement got folded back into their budget,” Munson said. “But in Montana, we ended up forwarding our money – almost all of it – for use on direct services to help struggling homeowners.”
Montana received $5.8 million in the mortgage settlement. The state directed much of its funding to help the Attorney General’s Office conduct foreclosure mitigation and partner with housing counselors across the state.
The funding also provides direct help through the Montana Legal Services Association, as well as NeighborWorks Montana. Homeowners who are underwater on their mortgage are eligible for refinancing under the current program.
“Counseling was happening before we funded it, so what we did is beef it up,” Munson said. “There are new counselors now where there used to not be. Hopefully, it’s a self-perpetuating system. It’s a three-year program, and we’re in the beginning of year two.”
Munson said calls to the Attorney General’s Office for help fighting foreclosure haven’t slowed. While Montana never saw the housing crisis rise to levels seen in Phoenix, Ariz., or Fort Lauderdale, Fla., it remains steady.
Families, he said, are still losing their homes, and the Office of Consumer Protection, now under the command of Attorney General Tim Fox, is still working to help borrowers.
“After the investigation in the fall of 2010 that led to the settlement, our complaints went from almost nothing to a spike, and our spike has been consistent ever since,” Munson said. “We have busier weeks than others, but it’s been steady – in the many hundreds overall.”
Munson said the office receives several calls a week from homeowners looking for help. On one particular day, he said, the office was swamped with 39 calls.
In one case, a family faced foreclosure after missing just three payments. In another case, a Flathead Valley homeowner hadn’t received any foreclosure notice, even after missing 49 monthly payments.
Munson said the cases represent two extremes, one where a bank is fast to foreclose and another where it hasn’t acted at all.
“It’s hard to predict when an entity is going to file a notice required to move forward with a foreclosure,” Munson said. “The main issue is that people aren’t being dealt with at the banks in a way that’s understandable to them. A lot of times, they get conflicting information.”
Paul Polzin, a research associate with the Bureau of Business and Economic Research at the University of Montana, said housing prices in Missoula County increased just .06 percent from the third to fourth quarter in 2012, much less than the national average.
From the fourth quarter of 2011 to the fourth quarter of 2012, prices jumped just 2.3 percent – less than the national average of 5.5 percent.
While home prices are slowly rebounding in Montana, Polzin said, the state escaped the worst of the housing crisis. Still, the impacts brought by foreclosures and a sluggish economy linger.
“Back when I looked at foreclosure rates in 2008 and 2009, Montana had a lower foreclosure rate than some of the ground zero states like Arizona and Nevada,” he said. “Flathead, Gallatin and Ravalli counties were hit probably harder by the housing downturn, because there were so many second homes and recreation homes.”
According to RealyTrac.com, Montana currently has 936 active foreclosures among 3,817 homes for sale. It’s a small number compared to even Idaho, which has 4,336 active foreclosures.
Flathead has 173 foreclosures, followed by 135 in Gallatin and 101 in Ravalli – the three leading Montana counties. Missoula has 76 active foreclosures, according to the website.
“A home is the biggest asset people have in America, by and large,” Munson said. “There’s so much more involved when you’re talking about a home. It’s not all economics, and the emotional stakes are high. So I feel strongly about saving homes.”
Munson couldn’t say how many homes the state program has saved to this point, but he said the numbers indicate that funding received in the settlement has helped. He said the Attorney General’s Office plans to release a list of success stories in the next few weeks, giving insight to the program’s success.
“There are some cases that don’t have a favorable outcome, and in those cases, we demand a humane exit for those families,” Munson said. “We treat each complaint as a potential violation of the law or the settlement. We work to get the foreclosure postponed long enough to review the complaint.”
Fred Carl, a retired Missoula broker, believes many current foreclosures are illegal. He cites case law in other states and refers to a system known as the Mortgage Electronic Registration System to make his argument.
The MERS system was set up by banks, he said, to separate the deed from the note. But to foreclose, Carl argues, the deed and the note must be together.
He’s hoping his argument gains traction in Montana and leads to new legislation or a Montana Supreme Court ruling on the issue.
“The ‘uninformed public’ needs a more complete picture of what took place with regard to the housing bubble,” Carl said. “If they know the cause, the illegal foreclosures, the heartache, and the severe damage both mentally and financially that has been fostered on thousands of families here in Montana and across the country, then individuals and the general public, will be better equipped to deal with the illegal actions being committed.”