Foreclosuregate rattles on, and it looks like the banks are going to lose their pound of flesh, in this case, $25-$26 billion over three years, in order to get off the hook for roughly 100 times that in real damage to the economy.
The final details of the pact were still being negotiated Wednesday night, including how many states would participate and when the formal announcement would be made in Washington. The two biggest holdouts, California and New York, now plan to sign on, according to the officials with knowledge of the matter who did not want to be identified because the negotiations were not completed.
The deal grew out of an investigation into mortgage servicing by all 50 state attorneys general that was introduced in the fall of 2010 amid an uproar over revelations that banks evicted people with false or incomplete documentation. In the 14 months since then, the scope of the accord has broadened from an examination of foreclosure abuses to a broad effort to lift the housing market out of its biggest slump since the Great Depression. Four million Americans have been foreclosed upon since the beginning of 2007, and the huge overhang of abandoned homes has swamped many regions, like California, Florida and Arizona.
In New York State, more than 46,000 borrowers will receive some form of benefit, with an estimated 21,000 expected to see what they owe reduced through a principal reduction, according to estimates by the Department of Housing and Urban Development.
The five mortgage servicers in the settlement — Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial — have largely set aside reserves for the expected cost of the accord and investors are likely to cheer its announcement because it removes one more legal worry for the industry, analysts said.
“I wouldn’t say it’s a panacea for the housing industry but it is good for the banks to get this behind them,” said Jason Goldberg, an analyst with Barclays.
Of course it is. And yes, about a million underwater homeowners will get some relief. But ten million will not, and the housing depression will remain for another 3-5 more years at the minimum. There’s still hope that the robosigning outfits like MERS are going to still face legal action, but for the most part, the banks are getting away with murder, the housing depression is going nowhere, and the bulk of homeowners won’t see a dime from this settlement.