As more details emerge about the massive $26 billion foreclosure settlement between the five biggest mortgage lenders and the states’ attorneys general, a growing number of borrowers are realizing that the deal will do little, if anything, to help them out.
Proponents of the settlement deal tout that roughly 1 million homeowners who owe more on their homes than their homes are worth are expected to have their mortgage balances lowered through principal reductions and another 750,000 would be able to refinance into loans with lower interest rates.
However, that’s only a fraction of the 11 million homeowners who are currently underwater on their homes, according to CoreLogic. And it’s also a mere sliver of the 3.5 million people who lost their homes to foreclosure over the past four years.
“The impact [of this settlement] will be small,” said Mark Zandi, chief economist for Moody’s Analytics. “It’s not a home run; it’s a single.”
Principal reductions will also only apply to certain borrowers who have mortgages still held by the five major lenders: Bank of America, CitiBank, Wells Fargo, J.P. Morgan Chase and Ally Financial.
Borrowers who have a mortgage held by Fannie Mae or Freddie Mac — roughly half the market — are out of luck. Loans insured by the Federal Housing Administration are also ineligible.
“If it’s offered to one group, it should be offered for all,” said Stacy Ovendale from Seattle, who says her home has lost nearly 50% of its value. “When my mortgage was written up, I had to take whatever program was available to me at the time, which happened to be FHA. … It’s so frustrating because my loan is with Bank of America but since it’s FHA, my mortgage is current and I have chosen to be responsible, there is nothing they can offer me in the way of principal reduction.”
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3 Responses
The borrowers are not a group that gets much symphony. They borrowed more than they could repay, gambled on real estate going up, and lost their bet. People who borrow money to play the stocks, or play the horses, and lose, are normally wiped out. They can all erase their debts by falling bankruptcy. Under the current deals, they all got houses they could never afford, virtually rent free for many years while they stalled foreclosure, and got to keep the money they had “cashed out” when refinancing.
The banks should be fined for abusing the legal system, the banks’ lawyers should be disabarred for ignoring the rules governing the practice of law, and the people who lost their bets on the housing market should declare bankruptcy and move to houses they can afford.
to akuperma
first not all that borrowed for a home fits generalization.
too many do.
for those of you that actually thought this gov’t cares about us you might now start to open your eyes and see the truth. If we fail to stand together we will lose even more of what little is left of our rights.
Lovely, akuperma. Plenty of acheinu are exactly what you describe. They overreached by buying modest houses that they could afford. But it was a bet that their income could keep up with the “investment.” Such risky bets against the economy, inflation, and taxes deserve no sympathy. They absolutely deserve to lose everything.
What a piece of filth you are.