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More on the Housing Settlement

By JLP | February 10, 2012

According to this morning’s WSJ, banks have reached an agreement over alleged foreclosure abuses (the WSJ’s wording). The settlement is for $25 billion. Details aren’t hammered out but in general, it will…

• Provide $17 billion to borrowers at risk of foreclosure.

• Offer reductions in loan principal and other assistance to qualifying homeowners.

• Includes a provision that will let some homeowners who are current on payments refinance mortgages even though they owe more than their homes are worth.

Oh, and there’s this…

In addition, the deal will provide cash payments to other borrowers who went through foreclosure during the past four years. These people will be eligible to receive around $1,500 to $2,000.

Those of us who were RESPONSIBLE get nothing.

Topics: Credit Crisis, Housing Market | 31 Comments »


31 Responses to “More on the Housing Settlement”

  1. Russ Says:
    February 10th, 2012 at 10:24 am

    This settlement is like when burglar sues a homeowner for shooting him in the knee cap with an unregistered handgun.

    The burglar is still a crook and just because the homeowner may have broke the law with the handgun, it doesn’t mean the burglar deserves any additional compensation.

    The fact is people got foreclosed on because they weren’t paying their mortgage. PERIOD. The technicality is that the banks allowed their securitization to get so sloppy, they were forging documents after the fact to ensure they could foreclose (which was wrong). However, one has nothing to do with the other.

    All this is was a way for some clever attorneys to stall the foreclosure process for home buyers who were not paying their mortgages.

    Show me ONE home buyer that has been foreclosed while paying their mortgages on time…

  2. JLP Says:
    February 10th, 2012 at 10:29 am

    Russ,

    I agree 100! Last paragraph of the WSJ piece:

    The settlement could provide relief to borrowers such as Marie Sainvilus, who lives in Middleburg, Fla., and is trying to stop a pending foreclosure by, among other things, arguing that she was a victim of robo-signing. A principal reduction “would be a blessing for me,” said Ms. Sainvilus, a nursing assistant. “I don’t want to lose my house.”

    There’s no mention of whether or not the woman actually deserved the foreclosure.

  3. tom Says:
    February 10th, 2012 at 10:30 am

    I’m over it. It’s not my money, nor your money.

  4. JLP Says:
    February 10th, 2012 at 10:32 am

    This stuff doesn’t happen in a vacuum, Tom. It is our money.

  5. BG Says:
    February 10th, 2012 at 10:40 am

    Russ said: “Show me ONE home buyer that has been foreclosed while paying their mortgages on time…”

    One

    Two

    Three

    Actually, this stuff is pretty easy to find is you bother to try.

  6. The Biz of Life Says:
    February 10th, 2012 at 10:44 am

    Why do we keep subsidizing irresponsibility and sticking the responsible with the bill? The banks are just going to pass these costs along to their customers.

  7. Retiredat40 Says:
    February 10th, 2012 at 10:51 am

    The average home under water is under by $50K. Something tells me this 2K is not going to help a whole lot. It’s a pass for the banks. How do you get 49 state AGs to agree on anything? Easy, you give them a chance to sell out.

  8. JLP Says:
    February 10th, 2012 at 10:54 am

    BG,

    Mistakes happen. And banks should pay for those mistakes. That said…THE VAST MAJORITY of the foreclosures were warranted.

  9. BD Says:
    February 10th, 2012 at 11:10 am

    This part helps responsible people: “• Includes a provision that will let some homeowners who are current on payments refinance mortgages even though they owe more than their homes are worth.”

    This helps people who are stuck paying above-market interest rates AND who did the right thing and kept paying their fixed-rate mortgages on houses that have dropped in value. Even without an “irresponsible” principal reduction, refinancing will save these responsible homeowners money.

  10. BG Says:
    February 10th, 2012 at 11:14 am

    JLP) no doubt — but the banks are settling (out of court) with the states to the tune of $25b. You do not settle unless you think it is the cheaper alternative.

    I’m no expert on the case against these large banks, but it must be a good one to warrant such a large settlement.

    Anyhow, if this settlement puts to bed the ongoing foreclosure nightmare, speeds up the processing of the foreclosure backlog, court case loads, etc, then I say do it (even if it is an ugly hack).

  11. JLP Says:
    February 10th, 2012 at 11:21 am

    BD,

    If your house is underwater, you paid too much for it (not very responsible, if you ask me).

    Besides, how does this refinancing work? Are they going to refinance the amount of the loan or will they refinance the amount the house is now worth? What becomes of the difference?

  12. Steve Braun Says:
    February 10th, 2012 at 11:22 am

    “Those of us who were RESPONSIBLE get nothing.”

    Wrong! We’re getting the bill…otherwise known as the shaft.

  13. Russ Says:
    February 10th, 2012 at 11:34 am

    BG, I was actually hoping someone would find the miniscule examples. So three out of how many millions of foreclosures… I knew of those. But you get the point.

    What the banks did was wrong, but this is nothing more than a political lashing and doesn’t change the fact that the “victims” were not paying their mortgages.

    Everyone else winds up paying for this stuff through more expensive mortgages. It is already a fustercluck getting a mortgage due to all the regulation and government involvement now. Most of which is totally unnecessary.

  14. BG Says:
    February 10th, 2012 at 12:00 pm

    Russ) Three examples that I found in a .002 second google search. If you bother to read the articles I linked, you will see quotes from the attorneys involved showing what a mess the foreclosure process is in (specifically due to the robo-signing the banks were doing). Instead of the banks doing their homework, they are pushing all the work on the courts and defendants lawyers.

  15. Russ Says:
    February 10th, 2012 at 12:24 pm

    BG, I can also find three examples of almost anything that is could be construed as screwed up, but in the context of the millions of actions that occur that aren’t screwd up, the few examples are INSIGNIFICANT.

    Surgeons cut off the wrong limbs. Airplanes crash. People drown in mop buckets. People get struck by lightening. Three people with no mortgage are foreclosed on… don’t play stupid.

    The foreclosure laws were written prior to all of the technological advances we have today. As a result, this case is about an antiquated court system attempting to deal with a huge number of transactions in a system that has largely become electronic. Back in the day, you needed to show real documents for obvious reasons to prevent property fraud and stealing of property. The courts have not kept up with the progression of the system.

    For example, you pay your mortgage to Bank of America every month and have been for 10 years. You now lost your job and your home is up for foreclosure. In the courts, BofA has to show they have the right to foreclose. What has happened is that BofA has cut up and diced the mortgage so that there are many parties who ultimately have some interest in the home BEHIND the scenes. In addition, BofA now also has to track down original documents of for one of the tens of millions of mortgages they are managing.

    Everyone knows bofa has your mortgage. heck, you are (or were) paying them every month. However, because BofA is having trouble finding the obscure document they can’t foreclose. instead of admitting the system got screwed up, bofa forged X document which was wrong. However, IT DOES NOT CHANGE THAT YOU DIDN”T PAY THE FREAKIN MORTGAGE.

    The implication of all this is that banks are going to be much more reluctant to make mortgage loans in the future AND when they do, the process is going to be such a fustercluck and more expensive to prevent this kind of nonsense from happening again. The reason it takes 2+ hours to close on home purchase and 200+ pages of documents is because of this kind of stuff.

    It is no different from when you lend your buddy money. He acknowledges YOU lent him the money. However, your buddy stops paying you back. You can no longer find the contract you wrote out on a napkin. Now when you wnat your money back, your buddy acts like he is innocent in the matter and his shady attorney then demands to see X contract to prevent you from beating his ass. You can’t produce X contract for whatever reason. Now you make a fake one because you want your god damn money back. You get caught making up the contract. Now your low life buddy turns around and sues you because you made up the contract completing skipping over that HE STOPPED PAYING YOU BACK.

    Because you made the contract up, the judge then says your buddy doesn’t have to pay you back and to make matters worse, you now need to pay your buddy restitution. How would that make you feel BG? After going through that, you would thikn twice about lending your other friends money and if you did, Im sure you would put them through the ringer.

  16. BG Says:
    February 10th, 2012 at 12:41 pm

    Russ) Since you know best — why don’t you call the banks and explain to them how stupid they are for settling out of court?

    “..In the courts, BofA has to show they have the right to foreclose…”

    ya, think? Why would the courts put such a draconian restriction on the banks.

    “…What has happened is that BofA has cut up and diced the mortgage so that there are many parties who ultimately have some interest in the home BEHIND the scenes…”

    Not my problem — they chose to do that, not the “victims” in the case(s).

    “…In addition, BofA now also has to track down original documents of for one of the tens of millions of mortgages they are managing…”

    Boohoo — cry me a river. That is their job and the business they are in.

    “..The reason it takes 2+ hours to close on home purchase and 200+ pages of documents is because of this kind of stuff…”

    and yet, STILL the banks screwed it up. You think ANY of that paperwork is to protect the homeowner?

    “..Now you make a fake one because you want your god damn money back….”

    Fraud, go directly to jail, do not pass go, do not collect $200.

    “…How would that make you feel BG?…”

    I don’t file fraudulent paperwork with courts. If you do that, then you deserve 100% of what you get.

  17. tom Says:
    February 10th, 2012 at 12:53 pm

    Again… who cares at this point? Shoring up housing helps EVERYONE. I own my house, I bought a foreclosure, and pay every month. Some people here need to get off their high horses and accept the fact that it will ultimately help the economy overall.

    This economy will not recover fully until housing does, and, no, I don’t feel like pulling the data.

    The banks are paying this bill, not you, not me. Blah blah blah, everyone will ultimately pay… will they?

    Also, it’s not irresponsible to buy a house then have the value plummet. If a giant sink hole opened up next to you, your house value would plummet too. Most of these people aren’t speculators, they are people like you and me. You can say “you should have rented until prices dropped!”, but that argument is so shortsighted and ignorant.

    Bottom line, let’s stop with the rhetoric and generalities.

  18. BG Says:
    February 10th, 2012 at 12:59 pm

    Well said tom.

  19. Ken Says:
    February 10th, 2012 at 12:59 pm

    I just refinanced my house with a 10yr fixed at 2.875% with $3,000 in closing costs. Pretty good deal for me.

    The scary part is I had to sign my name over 100 times over various pages of small print. I have my MBA, I’m educated enough, I’ve refinanced 4 other times, but this still makes me nervous about what did I miss in the small print.

    The lawyers are the problem. They prepared these documents to protect the banks and the little guy is left signing something he doesn’t understand. It’s a cop out to say, he should have paid for attorney. You might as well just say, he should just rent for the remainder of his life.

  20. JLP Says:
    February 10th, 2012 at 1:10 pm

    Tom,

    I agree that we need to get this housing bs behind us before we can move on. That’s been my point all along. The problem is: HOW do we do that? So far, all we have seen is various government programs to help people stay in their homes, which has only served to prolong this crisis. Why? Because people cannot afford their homes in the first place. I did a calculation once where I took an example of someone who was needing help with their mortgage. I figured up that even if they had a 0% loan, they STILL wouldn’t be able to afford the payments! We should have allowed the foreclosure process to work its magic in the first place.

    There were lots of people who purchased homes because prices were going up quickly and they felt pressured to buy in order to keep from having to pay even more later. The word for that is speculation. Sure, they innocently got caught up in a sea of emotion but that’s their mistake. They shouldn’t get a reduction in principal because they paid too much for their home.

    How is that any different from buying stock in a company, it losing value, and then expecting someone to pay you the difference? It’s not.

    Finally, I can assure you that the bank’s customers will pay for this settlement. Somehow, some way, we will pay.

  21. JLP Says:
    February 10th, 2012 at 1:15 pm

    Meanwhile…

    The (bad) mortgage brokers who profited handsomely from these deals and immediately sold them to the banks have vanished.

  22. JLP Says:
    February 10th, 2012 at 1:26 pm

    Ken,

    I could see how that would be scary. I wonder if the bank/lender would let you take the paperwork and read it before you signed it?

  23. BG Says:
    February 10th, 2012 at 1:38 pm

    JLP) Check out this article, 7 pages long though:

    One Nation Under Fraud

    I think the banks settled because the alternative is that there would be no banks.

  24. Retiredat40 Says:
    February 10th, 2012 at 1:43 pm

    Between mortgages and student loans, the banks are toast. That doesn’t even count the credit card debt that will never be paid and will hit in a couple of decades if not sooner.

    It’s time to writedown and refinance these mortgages, let the banks take their losses and get taken over and restructured. Wipe out the stockholders and haircut the debtholders. Call it the biggest financial disaster in human history and move on.

  25. Russ Says:
    February 10th, 2012 at 1:44 pm

    Ken, this is exactly my point. The documents have to be that way because if they aren’t some dumbass will claim the bank duped them and then the bank has to protect themselves as well to ensure they can actually foreclose on top of it. Not too mention all the MINDLESS and WORTHLESS documents the govt requires banks give you that do nothing but further confuse borrowers (APRs, TIL, etc).

    Because of this settlement, I will guarantee at least another five pages are going to be added to the 200 you already signed.

    One my favorites is a disclosure that says if you don’t pay your mortgage on time it will hurt your credit? REALLY? But guess what, I am sure someone didn’t pay their mortgage and claimed ignorance that it would hurt their score.

    I deal with this stuff everyday as mortgage broker/banker and see the fallout it causes. I am not defending the banks necessarily for what they did with the robosigning, but don’t think it absolves the supposed victims. It is nothing more than attorneys figuring out how to keep folks in their homes for years without making their payments.

  26. Stacey Says:
    February 10th, 2012 at 4:06 pm

    “If your house is underwater, you paid too much for it (not very responsible, if you ask me).” C’mon JLP, I’m very responsible and I paid too much for it, in hindsight. However at the time the appraiser was amazed at the great deal we got, as it appraised $80,000+ higher. So at the time of the bubble, we had lots of company with “overpaying.” However, we can still afford the payment and make it. That’s the difference with us and “the other guy.”

    Still, I don’t agree with this settlement. Just flush contract law down the toilet.

  27. BG Says:
    February 10th, 2012 at 4:13 pm

    “Just flush contract law down the toilet.”

    The banks shredded the contract (paperwork), so they are the ones who made the mortgages null/void. The banks are truly lucky anybody is making payments right now.

  28. BG Says:
    February 10th, 2012 at 5:06 pm

    Russ) Look at the situation from a “responsible” homeowners point-of-view. I have been making mortgage payments every month for countless years. What assurances do I have from the banking industry that once my mortgage is finally paid off, they will return to me a clear title/deed to my property (not fraudulent paperwork crap)?

    Sure, 10% of homeowners are failing to live up to their side of the mortgage contract. But 100% of the banks (at least the ones in the settlement) are failing to live up to their end, and especially for responsible homeowners who DO pay their mortgages on time.

    The banks can’t even prove to a foreclosure court proceeding that they have ownership of the title in question. What makes you think that YOUR title is so secure?

  29. JLP Says:
    February 10th, 2012 at 5:06 pm

    I know Stacey. I didnt mean that to infer everyone. We paid a very modest price for our house in 1999. It increased in value over the years but has dropped in value since the credit crisis. We’re not underwater but we also don’t have that nice equity cushion we once had.

    I was referring more to the people who bought during the heat of the market, thinking they were going to make a killing.

  30. Jack Says:
    February 10th, 2012 at 5:56 pm

    > Shoring up housing helps EVERYONE.
    > I own my house, I bought a foreclosure….

    No, Tom, it doesn’t. As you demonstrate, the COLLAPSING market helped YOU, because you got a less expensive house.

    Shoring up the housing market helps those who want to sell, and hurts those who want to buy. Why should one group be favored over another?

  31. Jack Says:
    February 10th, 2012 at 6:09 pm

    Of course, now that you have bought the house, it is understandable that you want the government to shore up the housing market so you don’t go underwater!

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