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California to receive larger share of mortgage deal

  • In this July 2, 2008 file photo, a bank owned home is for sale in Sacramento, Calif. (AP Photo/Rich Pedroncelli,file)

SACRAMENTO — California should receive at least $20.6 billion from a settlement with the nation's major mortgage lenders, the largest share of any state and about $2 billion more than expected when the agreement to assist homeowners was announced last year, according to a report released Thursday.

The money from five banks will help an estimated 175,000 California homeowners struggling with their mortgages.

The national Office of Mortgage Settlement Oversight announced the state-by-state breakdown of the $42 billion national settlement. It covers every state except Oklahoma, which struck its own agreement with the lenders.

"We're going to definitely overshoot what we thought we would get at the national level," said Katherine Porter, a University of California, Irvine, law professor who is overseeing how the settlement is being implemented in the state. "I think that's great news for the state's entire economy."

She predicted the benefit to the state ultimately could reach $22 billion, based on her analysis of the national report.

Nearly 100,000 California borrowers are getting reductions in the amount they owe on their home loans or an outright forgiveness of their loans, at a cost to banks of about $11 billion.

Most of the rest of the money is going to about a third of the borrowers who completed short sales, in which the lender agrees to a sale price lower than what is owed on the property, or to deeds in lieu of foreclosure, in which the lender accepts ownership of the property instead of foreclosing.

Only a fraction is aiding borrowers who are current on their payments but owe more on their mortgage than their house is worth. About 8,300 of those homeowners have been able to refinance their mortgages at a lower rate, saving a total of about $445 million.

The 8,300 is far fewer than the 28,000 underwater homeowners who had been projected to receive assistance when the settlement was announced a year ago, but Porter said many refinancings are still in progress and the number will grow.

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