49 states accept $25 billion foreclosure-abuse settlement

By Catholic Online (NEWS CONSORTIUM)
2/11/2012
Catholic Online (www.catholic.org)

Settlement only pays $2,000 for those unjust foreclosed upon

Forty-nine states have accepted a $25 billion foreclosure-abuse settlement with the five largest mortgage lenders. While coming as welcome news to many, primarily those "underwater" in their mortgage payments, it only pays $2,000 to those already wrongly foreclosed upon.

During the financial and housing crisis, home values sank and millions of Americans edged toward foreclosure. Many companies processed foreclosures without verifying documents. Some employees signed papers they hadn't read or used fake signatures to speed foreclosures, in an action known as 'robo-signing.'

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LOS ANGELES, CA (Catholic Online) - The majority of the deal requires the banks to reduce some loans and refinance mortgages for underwater borrowers. Oklahoma was the only state holdout to the agreement.

President Obama hailed the agreement as a "landmark settlement" that would "begin to turn the page on an era of recklessness" while sending relief to strapped homeowners.

Under the agreement, five major banks, Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial will reduce loans for nearly one million households.

However, those who lost their homes to foreclosure are unlikely to get their homes back or benefit much financially from the settlement. For homeowners who were improperly foreclosed upon, the banks will cough up checks of $2,000 to about 750,000 Americans. The banks have three years to fulfill the terms of the deal.

Critics say the proposed deal doesn't go far enough, arguing for a thorough investigation of potentially illegal foreclosure practices before a settlement is hammered out.

The agreement was designed more toward homeowners who are struggling to make payments currently, who still have possession of their homes. The agreement requires the banks to commit a substantial amount of money toward changing loan terms.

At least $10 billion will go toward reducing the principal for borrowers who are delinquent or underwater borrowers at risk of default and at least $3 billion will go toward refinancing. Other payments will go toward state governments and the federal government to "repay public funds lost as a result of servicer misconduct," according to the Justice Department.

President Obama acknowledges that no single action would heal the housing market, but described the settlement as an important step that would address alleged abuses by mortgage lenders, such as using fake signatures in the foreclosure process.

"These practices were plainly irresponsible, and we refused to let them go unanswered," Obama said.

Oklahoma, the lone state opposed to the agreement, will receive no money. That state's attorney general had opposed the massive fine included in the settlement, and reportedly was concerned the penalty went beyond the scope of the original investigation.

Attorney General Eric Holder said the deal would "hold mortgage servicers accountable for abusive practices."

During the financial and housing crisis, home values sank and millions of Americans edged toward foreclosure. Many companies processed foreclosures without verifying documents. Some employees signed papers they hadn't read or used fake signatures to speed foreclosures, in an action known as "robo-signing."

As part of the agreement, the 49 states have said they won't pursue civil charges related to these types of abuses. Homeowners can still sue lenders in civil court on their own, and federal and state authorities can pursue criminal charges.

� 2012, Catholic Online. Distributed by NEWS CONSORTIUM.

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Keywords: Foreclosure-abuse settlement, underwater mortgages, Oklahoma, Mortgage payments, robo-signing

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1 - 6 of 6 Comments

William Cinfici
1 year ago
Rob, thank you for your kind comment. Yes, I am aware that the money from the settlement was not tax money. I did not imply that it was. It was, however, the result of federal litigation brought by the Obama Administration. My reference to federal tax money was in regard to earlier Obama Administration policies that this settlement augments or supplants. The bank bailouts are a different issue, one that is more of a matter of prudential judgment than a moral concern. One could argue reasonably that because the federal government insures depositors, it was far less costly to prop up the banks with loans in order to avoid having to reimburse every depositor. It is a critical distinction that the banks were loaned money, not given principal reductions, as is the case in the mortgage settlement. Moreover, the banks made these bad loans because of Carter and Clinton Administration policies requiring loans to the poor with bad credit. Because the federal government caused the mortgage crisis, it arguably had the responsibility to bail out the banks. Your point is well-taken that these loans to the banks are what will fund, at least in part, the mortgage settlement. In that sense, then, it is a federal tax dollar bailout of irresponsible homeowners. Yes, the expansion of the power and size of the federal government was alarming even before Obama became president. I like your point about reimbursing the rest of us for lost equity.
Rob
1 year ago
William, you realize that bank bailouts were Bush policies right? And the money from the settlement is paid by the banks, not the government? Other than that I agree 100% with your post.
William Cinfici
1 year ago
This settlement is outrageous because it rewards people who were not creditworthy who bought expensive homes they could not afford, including even those who lied about their creditworthiness. Under the guise of helping those affected by wreckless forecslosure practices, most of whom were not improperly foreclosed upon, all homeowners who have not been making their mortgage payments will be rewarded, while those who have been making their payments -- and yet still saw their home values plunge -- will be among those paying for them, in the form of costs banks pass along to their customers. Yet the few who were improperly foreclosed upon receive only a relative pittance! An additional moral outrage, besides rewarding bad or unwise behavior (taking on debt one could not handle, and failing to pay one's debts absent extreme misfortune) and punishing good or prudent behavior (paying one's debts), is that by reducing loan principals, this settlement violates the sanctity of contracts. In short, the message sent is that only fools pay their bills because government will make sure your bill is paid. It was an earlier Obama Administration policy to do the same outrageous thing with federal tax dollars that sparked the Tea Party movement.
Rob
1 year ago
The media is touting this number like it's large. First, between all these banks $25 billion is chump change. And it's not like they are going to write checks. They are just going to adjust loan rates etc and actually not pay a penny out of pocket with the exception of the $2,000 checks that will be a good tax write off for them. What folks are not demanding is that the citizens of this country be compensated for two things. First we should be compensated for lost equity. The fact that our politicians are doing nothing about that show how little they get the middle class. The majority of our wealth is tied up in our homes that apparently are becoming less valuable by the day. Second, these banks would have completely failed had we not bailed them out. The payout should be what it's worth for them to still be in exisitence at our expense.
Missy
1 year ago
"And $0.00 dollars to those homeowners who have been making their payments but watched their equity disappear through no fault of their own."
I agree Rob. The thing doesn't make any sense. If I lost my home already, what's $2,000 going to do for me? Why not force the Equifax, et al to erase the foreclosure from the credit report? That would be more helpful. Or force towns to lower the assessments so the real estate taxes go down for current homeowners. I also don't understand what the "fake foreclosures" mean. Is there a better article somewhere explaining it?

I have no idea of the real reasons how or why the housing market fell. But my own personal experience from buying a house in Dec 2009 & having to sell it less than 2 years later, our house is being sold for $15,000 less than we bought it for, which is $3,000 less than we owe. We will also owe the realtor an insane amount of money. No one is coming to our aid to help us figure out how to pay off these amounts.

The person we bought the house from in 2009, owned it for 4 years and sold it to us for $90,000 less than they bought it for. In 2009, we thought we were getting a great deal & the market wouldn't keep falling. What a mistake. But who knew, too, that we'd have to sell & relocate. Once we sell our house, we will start saving our money to buy something else, but who knows if the market is still dropping.
Rob
1 year ago
And $0.00 dollars to those homeowners who have been making their payments but watched their equity disappear through no fault of their own. Hopefully the reason's that folks are underwater is reviewed and money isn't being paid out to folks who treated their homes like ATM machines. Help sould be provided to those who really need it. It should not be provided to those who abused the system through their own irresponsible borrowing. But I guess if we are going to give money to the banks, why not everyone right?

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