Presented as a win against predatory banks and mortgage lenders who illegally foreclosed on homes, the $25 billion settlement was received with much praise.
Then the cracks started to appear…
Instead of doing anything to stem the foreclosure crisis, the settlement immediately enabled mortgage lenders to speed up foreclosure filings, with many parts of the country seeing high double digit and even triple digit jumps in bank possessions of homes.
Then just days ago Inman News revealed just how little of the money will even go towards housing in any form. It seems only a tiny fraction of the money is to be divvied out in cash to the states, or around $5 billion. Now some states are taking it upon themselves to divert this cash to soaking up the gap in their budget deficits instead of directly helping homeowners or the housing market. This includes Wisconsin, Virginia, Texas, Missouri, Georgia and now California.
The other $20 billion is to come mostly in credits or to be discounted for refinancing homeowners and modifying loans. However, this is money that banks and mortgage lenders would lose anyway due to foreclosures and if anything just compensates them for cleaning up the mess they made in the first place, while providing protection against lawsuits.
What’s worse is that during this whole time the government has directed people away from independent help, to programs which have frequently meant underwater homeowners borrowing more. With re-default rates around 50%, this obviously isn’t providing lasting help for homeowners, while the banks have been compensated for poor modifications. Now many mortgage lenders are even going a step further and are seizing wages and belongings as well as raiding ex-homeowners bank accounts to make up for their loses.
Any homeowners out there who are still struggling with their mortgages desperately need to seek out independent, professional help to stop foreclosure or at least negotiate the best possible exit they can, which protects them from further harassment.
