So this wasn’t the only real estate news from last week but it sure took center stage. With much pomp and circumstance, the Obama administration touted the deal they made with the 5 biggest mortgage lenders to help bail out homeowners who owe more than their home is worth.
On the surface, and to people who didn’t bother to take 5 minutes to read the details of the deal, it looks like a coup for the Obama administration as they manhandled the big banks into coughing up $5 billion each to create a fund to help underwater homeowners right side their mortgages.
According to President Barack Obama:
“We have reached a landmark settlement with the nation’s largest banks that will speed relief to hardest hit homeowners and some of the most abusive practices of the mortgage industry. And begin to turn the page on an era of recklessness that has left so much damage in its wake.”
But upon further review it seems as though homeowners and the real estate industry are simply getting screwed by government and big banks, yet again. I’ve shared some quotes from a few articles below and provided links to the original article for those of you who want more details.
The Deal Is Done, but Hold the Applause
There’s no doubt that the banks are happy with this deal. You would be, too, if your bill for lying to courts and end-running the law came to less than $2,000 per loan file.
For most homeowners, it will barely move the needle. Forgiving $17 billion in principal “is a drop in the ocean,” Mr. Diggle said, “given that close to 11 million borrowers are underwater on their loans to the tune of $700 billion in total.” Doing the math, $17 billion in write-downs would be about 2.4 percent of the total negative equity weighing down borrowers across the nation now.
Original story from: NY Times
The Top 12 Reasons Why You Should Hate the Mortgage Settlement
#2 “That $26 billion is actually $5 billion of bank money and the rest is your money.”
#4 “That $20 billion actually makes bank second liens sounder, so this deal is a stealth bailout that strengthens bank balance sheets at the expense of the broader public.”
Original story from:Naked Capitalism
Mortgage deal means more foreclosures
“Even as the $26 billion mortgage settlement helps hundreds of thousands of troubled homeowners, it will bring a wave of new foreclosures.”
“Many lenders held off on reposessing homes during the complex negotiations between 49 state attorneys general and federal officials.”
Original story from: CNN Money
Mortgage settlement is great — for politicians and banks
”What about homeowners? They don’t get much, especially in relation to the scale of the housing crisis. More than 2 million owners have lost their homes to foreclosure during the last four years; this deal will provide 750,000 with a payment of $2,000 each.”
Original story from: LATimes
Mortgage Settlement as Attorney General Sellout: Deal is Not Done, and Final Version Guaranteed to be Worse than Advertised
“Maybe the Administration believes its own PR and thinks this measley program will help the housing market, or more important, secure the fealty of banks. But my guess is that the fact that 15 AGs concerned about the negotiations had met is what pushed the Administration into high gear. They did not want a meaningful, cohesive opposition forming. In addition, I am certain some evil genius in the Administration understood full well the value of destroying the AGs’ bargaining leverage before the final phase of negotiations.”
Original story from: EconoMonitor
What do you think? After reviewing the information above does it seem like homeowners and the real estate industry got screwed again by government and big banks? Leave a comment if you feel so compelled.
For more information on mortgages, check out 5 Cool Mortgage Infographics