destin real estate

Under an agreement between the U.S. Attorney General’s office and five major U.S. banks, e.g.,  Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial, the principal amount of mortgage loans for nearly 1 million homeowners will be reduced.

The agreement, worth an estimated $25 billion is also said to include a provision that would pay approximately $2,000 each to about 750,000 homeowners who may have been improperly foreclosed upon, particularly during the “robo-signing” period in which foreclosing lenders were accused of falsely and improperly executing foreclosure documents.

$10 billion is supposed to be earmarked for mortgage principal reduction. This may sound like a big number, that is, until you divide it by the number of homeowners affected. At 1 million targeted homeowners, this only equates to a reduction of about $10,000 per mortgage. As it is extremely rare to see a mortgage that is underwater by anything less than $50,000, this is an incidental gesture.

At least $3 billion is supposed to be earmarked for “refinancing”.  Again, if we do the math, this would only equate to 15,000 mortgages at $200,000 each.

According to the AG’s statement today, this settlement is “to ensure justice, and to recover losses, for victims of reckless and abusive mortgage practices”.  This agreement does none of those things. It certainly does nothing to ensure justice. It simply puts to rest a slew of politically motivated lawsuits in 49 of the 50 states. Oklahoma is the sole hold-out.

With 2.2 million mortgages said to be in some stage of foreclosure, today’s announcements look like little more than window dressing.  When the AG says “recover losses”,  the question becomes, recover losses for whom?  And who are these “victims of reckless and abusive mortgage practices”? No one put a gun to anyone’s head to force them to borrow money. No one forced anyone to take out a second mortgage or a cash-out refinance on their primary residence and then spend the money on condos, cars, boats, vacations  and bobbles.

This position on the part of our government serves to distract from the needs of the many responsible individuals who have become un or under-employed in this economic cycle.   Homeowners who are in need of mortgage assistance through no direct fault of their own. These responsible individuals are now being lumped into the same hamper as the so-called predatory buyers and mortgage abusers.  Is this just another way to reward those who abuse our system while punishing their responsible counter-parts?

In retrospect, it is clear that many banks were reckless and many borrowers were reckless.  The only difference between them? The banks can’t register to vote!