$25B foreclosure settlement lacks “bite” for banks and relief for distressed homeowners

New York /
Mar.March 28, 2012 10:00 AM

Intended to simultaneously punish banks for their foreclosure practice and help American homeowners in distress, the $25 billion federal foreclosure settlement contains significant elements that reward banks for standard practices and do nothing to alleviate troubled homeowners, according to the New York Times.

The settlement stipulates that banks give at least $17 billion to help borrowers who have “the intent and ability” to stay in their homes. But more than $2 billion of that obligation can be met by donating or demolished abandoned homes and $1 billion more can be used to help foreclosed families move out. In fact, only $10.2 billion must be used for principal reductions to underwater borrowers.

The Times said officials who outlined the settlement say it wasn’t only meant to prevent foreclosure but also to reduce large inventories of homes in limbo that depress property values. The measure being taken outside of principal reductions help neighbors who were affected by a weakened housing market brought about by improper loan servicing.

But Moody’s analysts doubt very many homeowners will be helped by principal reductions in a meaningful way, according to the Times, and by giving banks credit for practices that are already routine, the settlement doesn’t have the “bite” initial headlines suggested. [NYT]


Related Articles

arrow_forward_ios
Ron Burkle and Andrew Zobler with The NoMad New York. (Google Maps, Getty)
NoMad Hotel heads back to the auction block
NoMad Hotel heads back to the auction block
Maverick Real Estate Partners principal David Aviram and the buildings to be sold. (Rosewood Realty Group)
Part of Chaskiel Strulovitch’s Brooklyn portfolio to be sold at auction
Part of Chaskiel Strulovitch’s Brooklyn portfolio to be sold at auction
Sen. Brian Kavanagh (Getty, iStock)
New York votes to extend eviction ban through August
New York votes to extend eviction ban through August
Avishai Abrahami with Ziel Feldman and Nir Meir, and 500 Bailey Ave, Buffalo, NY; 707 Spence Lane, Nashville, TN; 1100 Milwaukee Avenue, South Milwaukee, WI (Getty, Google Maps, NY Supreme Court)
Ziel Feldman, Nir Meir accused of fraud over $30M loan
Ziel Feldman, Nir Meir accused of fraud over $30M loan
(iStock)
Hot, hot, hot: Resi market sets new price records in March
Hot, hot, hot: Resi market sets new price records in March
Philip Falcone and his homes at 142 Crestview Lane in Sagaponack and 22 East 67th Street (Getty, Corcoran, Google Maps)
Phil Falcone files appeal halting foreclosure of UES, Hamptons homes
Phil Falcone files appeal halting foreclosure of UES, Hamptons homes
Philip Falcone and his homes at 142 Crestview Lane in Sagaponack and  22 East 67th Street (Getty, Corcoran, Google Maps)
Foreclosure on Phil Falcone’s homes can move forward
Foreclosure on Phil Falcone’s homes can move forward
(iStock/Illustration by Kevin Rebong for The Real Deal)
Foreclosures and evictions could be halted for rest of 2021
Foreclosures and evictions could be halted for rest of 2021
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...