A $20 Billion Foreclosure Settlement? Obama Says Yes
Should the Federal government extract a $20 billion foreclosure settlement from the big banks? President Obama says yes.
Nearly six months after the scandal first erupted, U.S. regulators investigating illegal mortgage-
foreclosure practices appear poised to levy fines totaling $20 billion against Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co. and other financial institutions accused of malfeasance.
While explicit terms of the agreement have yet to be released, the Treasury Department and Department of Housing and Urban Development (HUD), with backing from President Obama, support the measure.
Penalty discussions against lending banks gained momentum after mounting evidence emerged that mortgage lenders submitted flawed or illegal paperwork in hundreds of thousands of home foreclosure cases, known popularly as the "robo-signing scandal."
However, two questions come to mind as settlement discussions progress:
1. Is a $20 billion foreclosure settlement even close to enough?
Many lawmakers and financial experts don't think so. Representative Maxine Waters, a top Democrat on the House Financial Services Committee released this statement::
"Though this figure sounds like a large settlement to those unfamiliar with the scale of the foreclosure crisis, we must remember that over 3 million homes have been lost to foreclosure since 2006...This settlement is too small, and will likely have one of two results: either borrowers will receive insignificant principal reductions, or reductions will only be available to a small subset of troubled borrowers."2. Will regulators be able to stop arguing long enough to close the deal?
There seems to be little agreement among agencies regarding the size and scope of the final pact. Members of the Treasury and the Federal Deposit Insurance Corp. (FDIC), want banks to cough up more than the proposed $20 billion settlement, but this doesn't jibe with the position of the Office of the Comptroller of the Currency (OCC). The Federal Reserve has yet to take a stand.
And around we go. All of this disharmony begs the question of whether a compromise will be reached at all, especially as the very banks being penalized rejected an earlier proposal of a $25 billion foreclosure settlement.
At least one fact is abundantly clear: The foreclosure crisis isn't going away anytime soon. In fact as a glut of foreclosed homes continues to saturate the market, many homes are being sold at ever-deeper discounts.
Do you think a $20 billion foreclosure fine is enough to resolve the robo-signing imbroglio?
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Ilyce R. Glink is the author of several books, including 100 Questions Every First-Time Home Buyer Should Ask and Buy, Close, Move In!. She blogs about money and real estate at ThinkGlink.com and The Equifax Personal Finance Blog, and is Chief Content Strategist at RealtyJoin.com, a community for real estate investors.
