Enter your email adress above to join our e-news list and press enter.
For Immediate Release
August 29, 2012
CLEVELAND, OH â€“ The 49 state attorney general settlement with the nationâ€™s five largest mortgage lenders is supposed to provide billions of dollars in relief to homeowners. Itâ€™s a result of widespread robo-signing scandal and other mortgage servicing abuses uncovered during the foreclosure crisis.
Today we received the first report on how the banks are fulfilling their obligations under the settlement. (Link) It leaves ESOP housing advocates outraged and wondering if the settlement is really being used to give relief to homeowners or to the banks who caused this mess in the first place.
A first look at consumer relief shows many more short sales being completed than loan modifications. Of the $10.561 billion of total consumer relief, $8.669 billion was done in short sales. That means the banks would rather sell a home for a loss and kick the homeowner out of the house than offer the borrower the same money to reduce the mortgage balance and keep the family in their home.
â€śThis is insane. I donâ€™t know whatâ€™s more perverse,â€ť said Mark Seifert, ESOP Executive Director. â€śThis settlement was supposed to punish these guys. Instead theyâ€™re using it to punish homeowners and clean up their own balance sheets.â€ť
â€śItâ€™s awful,â€ť says Paul Bellamy, Director of Research and Development at ESOP. â€śHow is a family losing their home â€śconsumer reliefâ€ť? Bellamy says that in some instances a short sale will serve a homeownerâ€™s best interests. â€śBut this report tells us that the banks are using short-sales 6 times for every single reduction in an underwater mortgage balance. Reducing the mortgage balance allows the family to stay in the home, continue making mortgage payments and starting to rebuild equity.â€ť Bellamy suspects this heavy reliance on short sales will improve the banksâ€™ balance sheets, â€śbut it is simply awful for hard hit communities.â€ť
â€śIn many cases short sales will go to an investor,â€ť said Seifert. â€śWe know, at least in our communities, when an investor takes over a property it generally does not lead to a good result for the neighborhood. This wholesale dumping will lead to another wholesale disaster of real estate speculation for our communities.â€ť