AGs Inch Closer to Foreclosure Deal
Posted by Matthew Brian Hersh on February 8, 2012
A $26 billion robosigning settlement between states and the nation's largest banks could be announced as early as Thursday, according to several news sources, potentially providing relief to homeowners affected by the burst housing bubble and the bureaucratic deficiencies that followed.
According to the New York Times, "$5 billion will go in cash payments to states and federal authorities, $17 billion will be earmarked for homeowner relief, roughly $3 billion will go for refinancing and a final $1 billion will go to the Federal Housing Administration." The final settlement tally could balloon closer to $30 billion if nine other major servicers join the settlement, reports say.
From the Times:
[T]he agreement is the broadest effort yet to help borrowers owing more than their houses are worth, with roughly one million expected to have their mortgage debt reduced by lenders. In addition, 300,000 homeowners are expected to be able to refinance their homes at lower rates, while another 750,000 people who lost their homes to foreclosure from September 2008 to the end of 2011 will receive checks for about $2,000.
Key to striking a deal between state attorneys general and Bank of America, JPMorgan Chase, Wells Fargo, Citigroup, and Ally Financial was satisfying a push led by New York Attorney General Eric Schneiderman that sought to leave the door open to future investigations and limit liability releases mainly in regard to robosigning.
Under the deal, according to the Times, "prosecutors and regulators still have the right to investigate other elements that contributed to the housing bubble, like the assembly of risky mortgages into securities that were sold to investors and later soured, as well as insurance and tax fraud."
This is good news for some homeowners and advocates. Following the announcement of the settlement, David Min of the Center for American Progress lauded the deal, saying it "ensures that banks are not allowed off the hook for other lending and servicing violations, and holds accountable those responsible for protracting the effects of our recent housing crisis."
The New Bottom Line campaign, however, was critical of the settlement, painting the deal as a one that "would encourage the banks to help homeowners who are in less need of assistance and [would] provide little relief to the most troubled homeowners."
George Goehl, executive director of National People's Action and an organizational member of The New Bottom Line said the settlement did not go far enough, calling for a "bold and broad fix" of the servicing system that would "provide real relief to struggling underwater homeowners and those who have lost their homes."
Goehl and SEIU's Stephen Lerner wrote about the New Bottom Line's efforts in the fall 2011 issue of Shelterforce.
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Matthew Brian Hersh proudly served as senior editor at Shelterforce from March 2008 to October 2012. He studied English at Rutgers University and has spent his professional career in journalism, policy, and politics. He displays many of the trappings of a New Jersey sports fan: dispirited Mets fan, former Nets fan before they left the state, and normally satisfied Giants fan. Hersh lives in Highland Park, NJ with his wife and two children.