After a lengthy court battle an agreement has been reached imposing a settlement deal for several big banks for their role in performing unlawful foreclosures. Many homeowners were forced out of their homes into foreclosure and, for others, bankruptcy. The settlement deal proposes nearly $26 billion in national payouts for victims and to revamp lending practices. While this news comes as good for many, mortgage industry experts are criticizing the details of the settlement.
The idea was to provide victims of unlawful foreclosures with a restitution payment for their troubles. What many people haven’t heard about the settlement deal is how the $26 billion will be divided. It is being reported that only $5 billion of the settlement funds will actually be used to pay restitution to victims, an average of around $2,000 per family. This amount is hardly enough to compensate for their troubles during the foreclosure process, let alone make a significant difference in their future homeownership.
The remaining $20 billion is reportedly planned for use as lender incentives for changing the way they do business. Lenders will be offered “credits” for participating in loan modifications and mortgage principal write downs with future homeowners. Since the news breaking about the mortgage settlement breakdown, many are disappointed in the overall terms of the agreement and are voicing concerns as to whether this strategy is the best in terms of the future of the housing market. One thing is becoming apparent at this point, the banks are getting a sweeter deal than deserved following their previous behavior.