No bank settlement deal on housing for now

Originally posted at AMERICAblog

Yesterday I posted on the news of a pending settlement between the federal government, some state Attorneys General and the nation’s five largest banks around robosigning and other foreclosure fraud issues. The deal looked really bad and there was strong opposition coming not only from large progressive organizations, but a core of Justice Democrat AGs. HUD Secretary Shaun Donovan and Iowa AG Tom Miller, who’s lead the settlement talks, met yesterday in Chicago with Democratic AGs and their staffs, ostensibly (based on reports citing Donovan and Miller’s offices) to finalize a deal. Surprisingly, no deal was reached and Miller’s office put out a statement saying, “We have not yet reached an agreement with the nation’s five largest servicers, and we won’t reach a settlement any time this week.” This is a huge victory for the officials, citizens, and organizations who have been pushing to stop a bad deal from moving forward.

Not surprisingly, though, the New York Times is reporting today that a deal is “inching closer.” This despite the fact that yesterday’s meeting in Chicago was allegedly going to result in the approval of a finalized deal. The Times does look at some of the numbers in the deal and how much aide it would conceivably bring to underwater homeowners and to those people whose homes were fraudulently stolen from them by banks using false documentation. The second number, according to the Times, is $1,800 per stolen home, which isn’t much more than two months’ rent for most people as compensation for their entire house being stolen. David Dayen looks at the aid that underwater homeowners would get and notes:

I would add that underwater borrowers with a second lien, like a home equity line of credit, owe more like $84,000 on average. So this barely gets them back a quarter of their equity, and the second will probably remain untouched (because that’s on the bank’s books, usually, even though it’s worthless).

Given that the single largest predictor of foreclosure is if a home is underwater, aid which keeps a home substantially underwater is not aid at all. At best it’s kicking the can down the road. These realities are no doubt part of the reason that there hasn’t been a deal yet, no matter how badly the Obama administration and Tom Miller want their to be a deal. As a result, I doubt that the President will mention anything in connection to the bank settlement talks in tonight’s State of the Union address, though I find it hard to believe that there won’t be some mention of the foreclosure crisis and how the administration hopes to deal with it in 2012.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s