U.S. foreclosure settlement doesn’t provide enough punishment for banks, relief for homeowners

Miami /
Mar.March 28, 2012 02:15 PM

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
Clockwise: 310-318 Northwest 25th Street, Chaim Cahane, Jonathon Yormak and Jon Krasner 
Wynwood developer sells retail property in foreclosure for $12M
Wynwood developer sells retail property in foreclosure for $12M
Miami-Dade Mayor Daniella Levine Cava (Getty, iStock)
Miami-Dade resumes pre-pandemic evictions after unannounced February break
Miami-Dade resumes pre-pandemic evictions after unannounced February break
Westime owner Jean Simonian and Washington Park Hotel. (Facebook via Westime and Washington Park Hotel)
Ladder Capital sells Witkoff’s Miami Beach hotel for $44M
Ladder Capital sells Witkoff’s Miami Beach hotel for $44M
Southland Mall in Cutler Bay (Google Maps)
Lender takes control of struggling Southland Mall in Cutler Bay
Lender takes control of struggling Southland Mall in Cutler Bay
(The Tides South Beach via Facebook)
Chetrit’s Tides hotel on Ocean Drive faces $45M foreclosure lawsuit
Chetrit’s Tides hotel on Ocean Drive faces $45M foreclosure lawsuit
117 Northeast First Avenue (Getty, Gut Miami via Twitter)
Lender sues owners of downtown Miami WeWork building over allegedly unpaid loan
Lender sues owners of downtown Miami WeWork building over allegedly unpaid loan
Ari Pearl, Jonathan Leifer and 9540 West Bay Harbor Drive. (Wyndam Hotels, PPG Development, L3C Capital Partners)
Ari Pearl, Jonathan Leifer acquire Bay Harbor Islands hotel out of foreclosure
Ari Pearl, Jonathan Leifer acquire Bay Harbor Islands hotel out of foreclosure
Lexington Realty Trust's Wilson Eglin and 5600 Broken Sound Boulevard, Boca Raton (Google Maps)
HSBC to take over Boca Raton office building following foreclosure auction
HSBC to take over Boca Raton office building following foreclosure auction
arrow_forward_ios

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

Loading...