All your problems are over as a result of the recent Nationwide Foreclosure Settlement. Not. Anticipated for months and widely heralded by banks, government officials and many media outlets as a landmark settlement agreement that will help end the foreclosure crisis, the sad reality is that once again the large financial institutions win and homeowners get screwed. As discussed below, the amount of money involved barely moves the needle past empty and the complete lack of operating rules, enforcement measures or deadlines makes the agreement nothing more than false hopes and empty promises. Once again the good old middle class American family is at the losing end of a battle with multinational banking interests who have lost touch with people and local communities.
Let’s discuss the specific provisions of the settlement itself. Initially, the total value of the deal is $25 billion dollars which pales in comparison to the overall size and scope of current underwater mortgages and basically ignores the damage done by banks and servicing companies in causing the mortgage meltdown. Knowing with complete certainty that they’d be held accountable for their illegal actions at some point, banks simply put the money in reserve long ago and then decided to raise nearly every imaginable banking fee to cover any losses while continuing to increase profits and year end bonuses.
The majority of the money – $17 billion of the $25 billion dollar total – is supposed to fund principal reductions and loan modifications to make monthly payments more affordable. Right concept but no planning and nowhere near enough funding to make it work. With roughly 11 million underwater mortgages totaling $700 billion dollars, $17 billion in reduced principal would be just 2.4% of the total percentage of upside down loans and leaves more than 97% of the problem untouched! Learn More About Underwater Mortgages
What this means for individual homeowners is unclear but can’t be good. In the best case scenario, one million loans will be reduced by $17,000 (or less) and the remaining ten million homeowners will get nothing. Given that the average underwater mortgage is $50-60,000 in the hole, even the few homeowners who actually qualify won’t get much help with payments that will only be lower by $200-300/month. Anything helps but let’s get real. As gas and food prices continue to go up, any savings in that range are quickly swallowed by increased costs for everything else. More on Foreclosure Loan Modification
As pathetic as the numbers look, it doesn’t get any better. Incredibly, there are no rules or operating procedures to figure out who actually gets help and who gets nothing at all. Although one million homeowners may get a little relief, ten million others get nothing and guess who decides who gets what? That’s right, the same bankers who caused the foreclosure crisis and have no interest in helping anyone but themselves will be working together with government bureaucracy to make it all work! Could be worse, we could live in Russia! Blame the Bankers for the Foreclosure Crisis
By the way, who decides if your home is actually underwater and what if the bank disagrees with your online research or a professional appraiser’s findings? Who pays for the appraisal and if there’s a dispute, who pays for a third appraisal and what assurance do you have that the bank will actually accept and agree with your appraiser? None is the only conclusion and you may actually spend a lot of money at the bank’s direction to end up worse off. Ten Ways to Beat the Bank and Stop Foreclosure
In addition to all this good stuff, there will also be numerous court challenges by banks and mortgage servicers once the efficient federal government actually writes the rules on how the process is supposed to work. You didn’t think the banks would agree to part with their money that easily did you? Factor in the mountain of paperwork that accompanies 11 million new applications for relief and the pathetic history of banks not complying with previous settlement agreements and the whole process seems destined to fall far short of the needs of America at a critical time in our history.
The refusal of the government, wealthy individuals and corporations to help homeowners is despicable and unacceptable but also misses the basic point. Homeowners are America and Americans, not corporations and banks owned by multinational interests and the rich one-percent. Like any other retail business they’re here to serve us and the weak effort to help the struggling core of America is just another example of how far our country has strayed from its essential values of life, liberty and the pursuit of happiness. I don’t see the words foreclosure or greed anywhere in the Constitution but pursuing life, liberty and happiness sure seems to be at odds with these concepts. Don’t Let Foreclosure Stress Control Your Life
The second portion of the settlement funds are somehow supposed to compensate homeowners who were subject to wrongful and often illegal foreclosures by giving these poor folks a whopping $2000 check for their troubles. Physical and emotional stress, the shame and embarrassment of losing their homes and the significant costs of moving and establishing a new place to live apparently means nothing more to the banks and politicians than a token payment that’s less than one month’s typical mortgage or rental payment. Renting Your Home To Avoid Foreclosure
Even more insulting, to qualify for this measly reward homeowners were literally forced to waive their constitutional right to sue banks for damages and agree to a complete release of civil liability without any input in the process. Are you kidding me? Intentional fraud documented in every state in America and a blanket waiver for every one of the perpetrators? Where the heck did they find a “Get Out Of Jail Free” card? Advance to Go for sure, but a remarkable perversion of the justice system and a mockery of the political system that allowed this agreement to pass.
Not only is a $2000 payment insulting and insufficient for everyone involved except the banks, but like the rest of the agreement there are no guidelines to decide who qualifies. In essence, we have the bankers themselves in charge of deciding if their own illegal actions warrant a $2000 payment but no enforcement measures if they’re wrong or simply ignore you. Given that 8 million homes have already been subject to foreclosure, helping just 750,000 of those homeowners with barely enough to survive one month is further proof of how worthless the agreement is and how little chance it has in succeeding to end the foreclosure crisis.
Not surprisingly, banks can barely contain their enthusiasm for this part of the deal and you’d be pretty happy too if the total risk for repeatedly lying to courts, willfully ignoring laws and creating reams of phony and fraudulent documents was just $2000 per loan particularly when closing costs were often 3-5 times that amount. Don’t think the banks will do this again do ya?
The third prong of the fatally flawed mortgage settlement and the one that seems to get the most media attention involves banks finally agreeing to a single contact person to work with homeowners. Thus rather than dealing with a different person for each phone call and letter, banks have agreed to a process already used by nearly every successful company worldwide-namely having someone familiar with you and your account actually handle your account! Who Owns Your Mortgage and Why Care
What’s mind boggling is why this common sense process was not in place from the start and why it took so long and so much pressure to change. We’re talking about people’s homes and the single most important asset in nearly everyone’s life. With dollar amounts in the hundreds of thousands and long and often complicated loan documents, we’re not dealing with refunds from Amazon for $24.99. Unfortunately, now that banks have joined the 21st century even more questions remain than answers.
Are banks planning on hiring thousands of individuals trained in the financial and legal complexities of loan transactions or are they more likely transferring existing staff from one call center to another? How many of the 11 million files will each individual contact person be assigned to handle and will the decisions be reviewed by supervisors or more fully trained professional lawyers and accountants? With no deadlines or enforcement measures what protections are in place to be sure your file is fully and fairly evaluated? If you have one point of contact, what do you if the person refuses to return letters or calls in a timely and professional manner? What to do With Your Second Mortgage in Foreclosure
Its hard to fathom that banks have once again escaped unscathed despite blatant and obvious violations of law that were clearly planned and part of a long term pattern where greed trumps morality, ethics and the law. How is it that banks repeatedly get away with this when the average citizen and homeowner would be locked up for committing similar acts?
Quite simply, they know they can get away with it and have for as long as our country has existed. Despite the unmitigated pursuit of profits at all costs, the banks know that the worst case scenario would be yet another government bailout so there’s no risk for them. Pillage and plunder, make enough money to run small countries then get rewarded when their dirty paws are discovered in the cookie jar. If you were rewarded for stealing food from your local grocer, what stops you from stealing again and taking more each time? If you understand why that’s the wrong way to live, you’re way ahead of the bankers and their single minded pursuit of wealth at the expense of the rest of us.
We’ll have much more on the Nationwide Foreclosure Settlement as matters continue to unfold so stay tuned. Meanwhile, spend time reviewing your foreclosure options and the rest of SavetheCave.com so you’ll be prepared to protect your foreclosure rights and move forward regardless of what happens with the success or failure of the worthless settlement.
Photo by Beit Weizmann