CHICAGO Nine mortgage companies have signed nonbinding agreements with Ohio to take steps to stem an avalanche of housing foreclosures in that state, the governor and other officials announced on Monday.
"This is the first in the nation where a state has achieved signed agreements between the state and loan servicers. That's why I say this is a historic day in Ohio," Gov. Ted Strickland said at a signing ceremony for the compacts.
The nine companies included: Citigroup Inc. (C.N); GMAC's ResCap; HSBC Finance Corp (HSBA.L) HBC.N; Carrington Mortgage Services; Ocwen Financial Corp (OCN.N); Option One Mortgage; Morgan Stanley's (MS.N) Saxon Mortgage Services; Select Portfolio Servicing and Goldman Sachs' (GS.N) Litton Loan Servicing.
The agreements, which extend to June 30, 2009, included substantial modification efforts for adjustable-rate and subprime mortgages, good-faith attempts to contact at-risk or defaulting borrowers as soon as possible, and progress reporting to the Ohio Commerce Department.
Even though the agreements were nonbinding, the Democratic governor said he believed the companies would work with the state because they have put their "honor and prestige" on the line.
The compact signers represented roughly 55 percent of current borrowers, according to Kimberly Zurz, Ohio Commerce Department director. She said the state will continue to have discussions with other companies.
Those companies included: JPMorgan Chase (JPM.N); Wells Fargo Home Mortgage (WFC.N); EMC Mortgage Corp and Wilshire Credit Corp, according to the state's Commerce Department.
In October, Strickland unveiled the compacts, which were subsequently snubbed by the industry, leading Ohio Attorney General Marc Dann to announce in November that a slew of civil investigative subpoenas was going out to subprime mortgage companies. He did not name the recipients.
At that time, Dann said the he planned to explore possible anti-trust and civil rights law violations, as well as violations of Ohio's consumer sales practices act.
Jim Gravelle, a spokesman for Dann, said while some of the compact signers had been sent subpoenas, their agreements were separate from the attorney general's investigation, which was ongoing.
Ohio had the sixth-highest foreclosure rate among U.S. states last year, with 153,196 filings, according to RealtyTrac.
Bill Cosgrove, president of the Ohio Mortgage Bankers Association, said while the group worked to facilitate dialogue with the state, no single solution was the only solution to Ohio's foreclosure problem.
(Reporting by Karen Pierog; editing by Gary Crosse)