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$26 Billion Foreclosure Settlement: Good News?

$26 Billion Foreclosure Settlement: Good News?

Early Thursday morning, the Obama administration announced a $26 billion fraud settlement binding five banks over their fraudulent foreclosure practices. The settlement could provide relief to nearly two million current and former homeowners but falls short of addressing the $700 billion in underwater mortgage debt.

But it is a start and there’s reason to think we’ll see more in the way of investigations and prosecutions.

First, let’s look at the details of the deal. Under the settlement, about 1 million homeowners will see the principal (size) of their mortgage reduced to reflect depreciation in value. For another 750,000 families or individuals who lost their homes to foreclosure, each will receive checks for about $2,000 each. Importantly, anyone who accepts the restitution payment also retains their right to participate in future lawsuits.

The settlement currently impacts claims against Wells Fargo, Bank of America, J.P. Morgan Chase, Ally Financial and Citigroup but could grow if the nine other mortgage servicing companies also under investigation sign on.

Admittedly, the impact of this settlement on consumers’ pockets or the housing market will be minimal. But if there is an upside to the deal, it is that the banks still maintain legal exposure and other, more aggressive prosecutions like the one brought by New York Attorney General Eric Schneiderman.

The whole unfolding of these claims and settlement is starting to feel more and more like an old-fashioned mass tort asbestos-style resolution. We already have some jurisdictions in places like Florida establishing specialty foreclosure courts to process the sheer volume of claims, and, just like asbestos claims, many parties along the market-chain are involved and share some culpability, making individual prosecution a time and labor intensive proposition. And given the trickle of settlements and open-ended releases, it looks like we’ll be litigating foreclosure fraud cases for years to come.

But maybe more importantly, that mortgage claims now resemble asbestos claims speaks quite persuasively about the products these banks have been pushing.

Related Stories:

Detroit Activists Want A Two Year Moratorium On Foreclosures

NY AG Brings New Charges Against Big Banks

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Photo from respres via flickr.

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49 comments

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2:59PM PST on Mar 6, 2012

Patrick... you are being sarcastic aren't you!!! Here's just a sampling of the many gaffes from Obama. saying "Cinco de Cuatro" instead of cinco de mayo when speaking with Mexican ambassador, or was it Calderon, How about the "57 states" he has visited, pronouncing 2 or 3 times in ones speech Corpsmen as corpse-men rather than cor-men, also talking about all the dead soldiers in attendance at his speech, He thinks there is an Austrian language.

And that is only to name a few of his many. what about my favorite saying that doctor's will remove tonsils to cure a sore throat, or amputate feet because it pays more.

take this man off teleprompter and we get a whole lot more.

You want to hear more, or are these enough for you to retract your comment.

1:41PM PST on Mar 6, 2012

If maturity is signified by delayed gratification then what does delayed responsibility make us?

10:45AM PST on Feb 16, 2012

This feels like a setup. Like a delayed-action political bomb set up during the Bush administration but to blow up after Bush was out of office. So does the birth control issue surfacing now, during the Obama administration.

11:46AM PST on Feb 12, 2012

Catherine, $260 billion would be a good start, just like Big Gov announcing that the unemployment rate if really 17 %, of course, it will never happen.

Just when you thought that you had seen it all, they may be crooks, but you have admit...they keep it interesting.

What's next...?

1:21PM PST on Feb 11, 2012

Jeffrey W. At least Obama has not come out with some comment that just made him look stupid or crazy yet EVERY one of the Republican candidates have. No matter how bad Obama looks to you, he is still the best choice out of everyone running for office.

4:17AM PST on Feb 11, 2012

That settlement should have been 260 BILLION, minimum, with all of that money going to the people foreclosed upon.

All of those foreclosed loans should have been renegotiated to 3% interest, all fines and fees deducted. Most of those people would have then been able to stay in their homes.

As it is, foreclosed homes are not selling, due to the bad economy and the unwillingness of the banksters-loansters to sell the properties that they stole, and likely the unwillingness of people to buy stolen property. Bad karma.

The banksters would rather allow an empty home to sit vacant and rot (and I have seen many, many, many examples), than to sell them for what they are worth in their ruined condition.

Corporations are not people.
People who work for corporations and do evil things for them are like Nazis.
And bad things always come back to haunt them

6:34PM PST on Feb 10, 2012

The banks and Wall St firms are Obama's biggest contributors.

6:17PM PST on Feb 10, 2012

Two grand eh? They're funny, we had homeless families in the streets when the shelters were overcrowded, we witnessed the toxic sub-prime fraud displacing millions of hard working Americans and many millions more now upside down on their mortgages. We have lost up to 40% equity on homes that represented the main source of retirement for seniors as their main value of their net worth. The wall street bandits who profited have been spared thus far, the banks that were bailed out, making token payments, and refusing to make loans to small businesses or homeowners citing insufficient collateral in their properties. We need some drastic action now !! The people have to stand up and speak up against this injustice !!!

3:38PM PST on Feb 10, 2012

I hope the investigations result in charges laid,convictions, and jail time for the culprits.

2:36PM PST on Feb 10, 2012

Some people rob you with a gun, some with a pen.

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