Back in the summer of 2007 I began writing about the coming recession/depression that was being triggered by the collapse of the residential housing market. Alas, no one in Washington, D.C., seems to have paid any attention to the looming fiasco. The rest is history and the housing market - and the larger economy - have never recovered from the missed opportunity to create a real solution to the still unfolding problem. For anyone trying to assist distressed homeowners, the process is beyond maddening and despite alleged programs for methods to assist homeowners who have lost jobs or find themselves upside down on their mortgages because of collapsed home prices, typically NOTHING is done and the homes end up in foreclosure. Which only serves to drive prices lower still and add to the number of homes facing foreclosure. Here in the Hampton Roads area, 24% of mortgages are said to be upside down. Now, as Ezra Klein at the Washington Post is reporting there may be a last chance for a meaningful fix to the problem. Personally, I am not holding my breath. Here are highlights (the referenced draft settlement can be found here):
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My colleagues Brady Dennis and Dina El Boghdady got their hands on an early version of the settlement that the country's attorney generals and a few federal agencies are hammering out with the big banks. This is the endgame to the mortgage servicing mess that dominated the news some months ago: the banks, having repeatedly broken the law while handling mortgage paperwork and conducting foreclosures, need to strike some sort of deal with regulatory authorities so they're not nipped to death by thousands and thousands of lawsuits. That means the state AGs and regulators have some leverage: the banks need relief from them, and so the question is how much relief they can get for homeowners in turn.
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The hope is that they can get something capable of stabilizing the housing market. For all that the economy is improving, housing remains a huge drag, with legitimate estimates suggesting we've still got as many as 11 million foreclosures in the pipeline. "The number one reason for nervousness about the economy in the next six to nine months is the foreclosure crisis," Moody's economist Mark Zandi told me last week.
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With Congress no longer interested in acting to ease the foreclosure crisis -- or, it seems, the jobs crisis -- this settlement is perhaps our last shot at stabilizing the housing market. The big thing that advocates are looking for is "principal modification": a process in which borrowers who are underwater on their homes would see the amount they owe to the bank reduced.
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The proposals attempt to address wide-ranging complaints about the servicing process. One would require the servicers to provide a single point of contact for borrowers looking to modify their loans. Another would require them to develop a portal that would allow borrowers to submit and track documents electronically in real time.The document also spells out the conditions under which servicers should consider principal reductions for certain borrowers.
*
Currently, if one contacts a lender, expect to be transferred countless times, be told to call other telephone numbers, and after hours of effort to have achieved absolutely nothing. It is a disaster and economically, we are all paying the price. Well, most of us - obviously, not the top income brackets which are getting richer while the rest of us stagnate or lose income.
*
My colleagues Brady Dennis and Dina El Boghdady got their hands on an early version of the settlement that the country's attorney generals and a few federal agencies are hammering out with the big banks. This is the endgame to the mortgage servicing mess that dominated the news some months ago: the banks, having repeatedly broken the law while handling mortgage paperwork and conducting foreclosures, need to strike some sort of deal with regulatory authorities so they're not nipped to death by thousands and thousands of lawsuits. That means the state AGs and regulators have some leverage: the banks need relief from them, and so the question is how much relief they can get for homeowners in turn.
*
The hope is that they can get something capable of stabilizing the housing market. For all that the economy is improving, housing remains a huge drag, with legitimate estimates suggesting we've still got as many as 11 million foreclosures in the pipeline. "The number one reason for nervousness about the economy in the next six to nine months is the foreclosure crisis," Moody's economist Mark Zandi told me last week.
*
With Congress no longer interested in acting to ease the foreclosure crisis -- or, it seems, the jobs crisis -- this settlement is perhaps our last shot at stabilizing the housing market. The big thing that advocates are looking for is "principal modification": a process in which borrowers who are underwater on their homes would see the amount they owe to the bank reduced.
*
The proposals attempt to address wide-ranging complaints about the servicing process. One would require the servicers to provide a single point of contact for borrowers looking to modify their loans. Another would require them to develop a portal that would allow borrowers to submit and track documents electronically in real time.The document also spells out the conditions under which servicers should consider principal reductions for certain borrowers.
*
Currently, if one contacts a lender, expect to be transferred countless times, be told to call other telephone numbers, and after hours of effort to have achieved absolutely nothing. It is a disaster and economically, we are all paying the price. Well, most of us - obviously, not the top income brackets which are getting richer while the rest of us stagnate or lose income.
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