As I have previously written, the government has reached a settlement with Ally Financial, Bank of American, Citibank, JPMorgan Chase, and Wells Fargo over the banks' illegal foreclosure practices. This settlement is a great... for the banks. Part of the deal includes $17 billion in principal reductions, which might sound like a lot until you consider that there are approximately 11 million borrowers with around $700 billion in negative equity, according to Paul Diggle, a property economist at Capital Economics in London. That works out to a 2.4 percent reduction on the negative equity, which works out to a joke in my book. And the banks have three years to distribute this money.
Homeowners who were improperly foreclosed upon will share $1.5 billion, which comes out to roughly $2,000 per improper foreclosure. Big whoop. If an improper foreclosure is only going to cost a bank $2,000, they should just keep doing them. I am willing to bet a $2,000 fine is cheaper than the cost of properly foreclosing on a home.
According to the Palm Beach Post, Florida homeowner's will receive $7.6 billion in loan modifications (only California will receive more than Florida). Approximately $170 million will be paid to Florida homeowners who were the victims of illegal foreclosure practices between January 1, 2008 through December 1, 2011. There will be $309 million in refinanced loans and the state will receive a direct payment of $350 million (and I am very curious to see what the state does with that money).
Interested in reading more about this? Check out this article from the New York Times.
http://www.nytimes.com/2012/02/12/business/mortgage-settlement-leaves-much-to-be-desired-fair-game.html?ref=realestate
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