Wednesday, February 15, 2012

Ruling will help some households, but won't put end to housing crisis

The $25 billion foreclosure settlement announced last week among five major banks and 49 states, including Texas, is a modestly positive step out of the housing crisis of the past several years.

The settlement sets aside $287 million for Texas homeowners, including those who are "underwater" on their mortgages — that is, their houses are worth less than what they owe on them. The banks also are required to send $141 million to the state treasury for violations of Texas law.

The deal potentially could help as many as 1.75 million households nationwide hurt by the bursting of the housing bubble in 2007 and the financial crisis that followed in 2008. The drop in home values — the average American home is now only worth what it was nine years ago — put millions of homeowners at risk of foreclosure. As the crisis deepened and the number of foreclosures rose, mortgage-servicing companies signed thousands of foreclosure documents without verifying the information in them — a practice called "robo-signing."

Victims of robo-signing — there are an estimated 750,000 of them — will receive checks of up to $2,000, thanks to the settlement. But the deal primarily helps as many as 1 million households that are at risk of defaulting on their loans, with about $17 billion scheduled to go toward reducing the principal on these households' loans by an average of $20,000.

Read the rest of the article at The Austin Statesman

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