Still No Justice for Mortgage Abuses
It has been six months since the big banks settled with state and federal officials over evidence of widespread foreclosure fraud, promising to provide $25 billion in mortgage relief in exchange for not being sued over past foreclosure abuses.
At the time, it looked like a sweet deal for the banks. The fines were paltry compared with the damage done to homeowners and the economy. And much of the relief the banks were obliged to provide could be met by continuing more or less with business as usual.
It still looks like a sweet deal.
The Office of Mortgage Settlement Oversight, the monitor of the settlement, released a preliminary report last week showing that 138,000 homeowners had received some form of relief from March 1 through June 30. That is roughly the number that would have been expected under various aid programs in effect before the settlement. Worse, with some three million borrowers now in or near foreclosure, according to Moody’s Analytics, it is nowhere near the level of relief needed to fix the housing market.
The type of relief provided — mostly short sales, in which a bank allows a homeowner to sell for less than is owed on the mortgage — had become increasingly common before the settlement.
Short sales are better than foreclosures, in part because they prevent vacancies that depress house values. But they are not punishment for wrongdoing in any meaningful sense; rather, they allow banks to get higher prices for underwater properties than they could have gotten in foreclosure sales.