Joe Nocera: The Foreclosure Fiasco
It’s been five days since Jessica Silver-Greenberg’s article on the latest bank settlement was posted on The New York Times’s Web site. I’m still shaking my head. Her “story behind the story” of the $8.5 billion settlement between federal bank regulators and 10 banks over their foreclosure misdeeds illustrates just about everything that is wrong with the way the government has handled the Great Foreclosure Crisis.
1. It is more about public relations than problem-solving. Pick a program — any program — that the Obama administration unveiled to help troubled homeowners over the past four years. Not one has amounted to a hill of beans.
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2. Accountability? What’s that? We have known for a long time that overwhelmed bank servicers took shortcuts, like robo-signing, that violated many state laws. They also put people through hell who were trying to get a modified mortgage. “I’ve seen marriages break up because of what banks put families through,” says Elizabeth Lynch of MFY Legal Services. All this settlement does is push those misdeeds under an $8.5 billion rug.
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3. It won’t actually help anybody. The settlement will cover some 3.8 million foreclosures. The government is going to distribute $3.3 billion dollars. It comes to around $868 per lost home.
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4. The money is being distributed with no regard to whether a borrower suffered harm. In some ways, this is the sorriest part of the whole episode. The foreclosure review never answered the key question: which borrowers had legitimate claims against their bank and which didn’t. Thus, the settlement doesn’t make that distinction. If you lost your house in 2009 and 2010, you are going to get money — whether the bank was culpable or not. “The notion of error is not involved in this settlement,” conceded Hubbard.
Full article here…
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