Some Colorado-based housing and lending organizations could receive part of the record $16.65 billion settlement between Bank of America and the U.S. Department of Justice.
Although an undetermined number of Colorado consumers affected by the financial and foreclosure crisis could see some relief — such as loan modifications, loan forbearance and forgiveness — the settlement reaches more broadly than one announced in 2012 that also brought consumer relief.
The latest settlement emanates from the bank’s involvement in the marketing of toxic mortgage-backed securities that in large part were tied to the lending practices of Countrywide Financial, which Bank of America acquired in 2008 as the housing market cratered. It offers more than $7 billion in relief to homeowners and blighted neighborhoods.
A $25 billion settlement in 2012 among the country’s top five mortgage servicers with the nation’s attorneys general focused largely on relief for affected homeowners. In that deal, Bank of America agreed to a $10 billion settlement, $7.6 billion of which was in consumer relief.
The monitor of that settlement in June released Bank of America, saying it had complied with all the necessary provisions, of which $50.1 million of relief was pegged for Coloradans.
How much of Bank of America’s latest settlement will end up in Colorado is still unclear and will probably take many months — the bank has until 2018 to make good on its promises — to determine.
But some details emerge in the settlement’s fine print, such as donations for community reinvestment and neighborhood stabilization.
Specifically, Bank of America agrees to pay demolition and property-remediation costs of abandoned or uninhabitable residential properties, although where and how much are undetermined.
Those properties will be donated to local nonprofits to either rehab or reduce blight. Again, location details are scant.
There is to be help for underserved areas in the form of $50 million in donations to nearly 900 Community Development Financial Institutions nationwide — 13 in Colorado — or other community-development funds.
A minimum of $200,000 will go to the Colorado Lawyer Trust Account Foundation, or COLTAF, which administers the state’s Interest on Lawyer Trust Accounts program. The trust — each state has one and Bank of America will donate up to $30 million for all based on community need — funds legal-aid groups. Donated money must be used for legal assistance in foreclosure prevention and community redevelopment.
The funds will be a surge for COLTAF, which last year saw interest on pooled trust funds — its sole source of revenue — drop by nearly half. As a result, funding to some legal-aid programs had to be cut.
“The extended period of the down economy has had a huge impact on interest earned, which is our sole source of funding,” COLTAF executive director Diana Poole said. “We’re so used to bad news in these years, this is quite a great bit of good news.”
The group largely funds Colorado Legal Services, the statewide legal-aid program.
Bank of America is to donate another $20 million for foreclosure-prevention assistance by housing counseling agencies approved by the U.S. Department of Housing and Urban Development. There are 33 in Colorado. Whether all the agencies will share in the funds or whether Bank of America determines which will receive funding is unclear.
Several provisions — the trust-fund donations and those to HUD-approved counseling agencies — mimic those negotiated in the Justice Department’s $7 billion settlement in July with Citigroup.
David Migoya: 303-954-1506, dmigoya@denverpost.com or twitter.com/davidmigoya
