“The trouble is, after going over these cases, the bottom line is that the vast majority of the foreclosures were and are valid. People didn’t pay their mortgages.”
‘Robo’ Foreclosure Settlement Turns Political
For over a year now, state attorneys general have been negotiating some kind of settlement deal with the nations four largest lenders, as well as several smaller ones.
The settlement pertains to faulty foreclosure processing, first uncovered in October of 2010 and now commonly referred to as “Robo-signing.”
Rather than dozens of lawsuits, the states initially were looking to assess one great punishment on the lenders and thereby appease borrowers who felt they were wronged. The banks were looking for wider immunity from securitization issues, and that is largely what has held up the negotiations for so long.
Now, suddenly, after umpteen “we’re close to a deal”s, apparently we’re now really close to a deal, largely because the State of the Union address is next Tuesday, and this is an election year. So at a meeting of Mayors Wednesday, the Secretary of Housing and Urban Development, Shaun Donovan, mentioned that a settlement would include principal reduction for about a million borrowers.
“With few other tools to help housing, the administration sees the deal as a way to take credit for helping underwater borrowers without exposing taxpayers to loss,” says Jaret Seiberg at Guggenheim partners, noting that the deal may not fully be in place by Tuesday, but a “framework” could be announced. “If this deal does score enough political points, then it will dampen calls for the administration to roll out more housing help such as a mass refinancing. As we remain dubious about the real impact of a deal, our view is that the administration will face pressure this spring to do more. That means more refinancings of GSE loans will still be on the table,” he adds.
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