Design H Mortgage crisis ‘settling’ down? H O M E
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Bank foreclosure settlement puts $2,000 price on devastated lives by D e nise M ont alvo
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hen Marin home buyers battled with these very loose underwriting guideit out in 2005-06, it seemed lines,” says one senior loan agent at Provident there was no limit to how high Bank Mortgage. “What they created was one prices would go. The rapid jump in sales of the worst financial disasters this country was part of a national trend to satisfy has ever experienced. The banks can take the appetite of Wall Street investors for some of this brunt, but banks compete and high-risk mortgage-backed securities. To if they’re offered a product and they don’t feed this enormous hunger, underwritsell it, their competitors would.” ing guidelines were loosened, making Wa l l S t r e e t bought loans as fast as it incredibly easy to qualify for a home they could be made, then commodloan. In 2007, prices took a dive as waves itized them and later hedged against of short sales and foreclosures flooded the losses. the market. Since then, roughly 4 million “I give [the settlement] a half a thumb families have lost their homes and about up that it’s moving in the right direc11 million are underwater. tion,” says Beth Rader, a foreclosure A $26 billion settlement agreement was prevention counselor at Fair Housing made in 2012 between 49 states (exclud- of Marin. She says people come to her, It’s hard to decide whether the glass is half full or half empty... ing Oklahoma) and the five largest banks, many with predatory loans, trying to BofA, Wells Fargo, JP Morgan Chase, Citi- save their homes at any cost. One couple of the problem with mortgages. There group and Ally Financial, got their payment modi- president and CEO of Bradley Real Estate. is about $17 trillion worth of residential to help the market move As far as compensating fied but the home was “It’s not beneficial for the market to real estate in the U.S. The meltdown reforward. California Attorworth $450,000 and the have people in their homes long-term sulted in a decrease in value of residential ney General Kamala Har- displaced homeowners debt was still $700,000. who are not paying their mortgages,” says real estate somewhere in the amount of ris fought hard to secure with $2,000, Rader “So, with no equity and Bradley. “It’s not good for the neighbor$4 trillion. Does $26 billion compensate the lion’s share (about $15 says, “It’s not much no chance of recovering hoods, for the real estate industry and for the American public for $4 trillion worth billion) for our state. The the value of the home, the overall economy.” of damage to our real estate market? settlement released these when you consider they’re essentially rentIt’s curious that Citibank and Chase Bradley points out that we can’t put banks from government the cost of their credit ing their own home,” have offered financial incentives of up to our banks out of business and we can’t claims over illegal foreclosays Rader. being wrecked and the $30,000 in relocation funds only to select make a settlement so big that we jeoparsures and misconduct in She favors the “single homeowners who agree to short sales. dize those institutions because they’re the servicing mortgages, in- emotional cost of having person contact” proviWere these banks motivated by know- same institutions that are now loaning cluding “robosigning,” in to move—the cost sion of the settlement which banks fraudulently because one of her clients ing that they had some problems with the for properties. We’ve gone from hundreds mortgage process, or something else they of banks competing for mortgages to signed thousands of fore- of what these people lost his home to forehad in the file, so that they had some po- a scenario where we’ll likely have only closure documents with- have gone through is closure during the loan tential legal exposure to these sellers? “I eight to ten choices of traditional lenders. out verification. modifi cation process immeasurable.” think where they offered $30,000, if we “I think these corporations are actually In return, we should due to dual tracking. looked into it a little deeper, we’d find going to fare well from that because the see more transparency in The person handling the out that the banks may have used even same corporations that are part of the lending, easier loan modifications, faster foreclosure had no idea a modification short sales and an end to dual tracking (a was in process with the same bank, so the more, let’s say devious practices and this is settlement, in the long run, are going to where I do believe these banks have some end up the primary lenders in the U.S. process where the bank forecloses while home foreclosed. also modifying a loan). Americans who As far as compensating displaced hom- liability,” says Bradley. Although he thinks That’s a $17 trillion market, so they’ll were illegally foreclosed upon from 2008- eowners with $2,000, Rader says, “It’s not the banks are acting responsibly by try- make up that 25 billion very quickly,” 2011 will receive up to $2,000. Fannie much when you consider the cost of their ing to do something to resolve it, he adds, concludes Bradley. “I pretty much guarantee you that in the Right now, the Marin real estate Mae (Federal National Mortgage Associa- credit being wrecked and the emotional next five to six years, we’ll find out what market is trending up, and in many areas tion) and Freddie Mac (Federal Home cost of having to move—the cost of what it was as bank executives leave, banks shut buyers’ needs exceed inventory, espeLoan Mortgage Corporation) products, these people have gone through is imdown and more discovery is done as a re- cially in the $500,000 to $900,000 price which make up about 80 percent of measurable.” sult of the settlement. There are some in- range. Now that the settlement has been all U.S. loans, are excluded from the “One of the impacts we’ve seen in the teresting things we’ll implemented, we should expect expedited settlement. Since they’re in government settlement is that find out, maybe some short sales and loan modifications. One conservatorship, they offer alternative the banks are now dirt that hasn’t been of the results of the mortgage meltdown solutions such as the HAFA program approving short Find more information on uncovered.” is record low interest rates, so you can outside of the settlement. sales at a greater the settlement and While $26 billion buy a home up to $750,000 in Marin with “In ’05-’06, it was ridiculously easy to get rate and more foreclosures at: sounds like a lot of only 3.5 percent down. ✹ a mortgage. I think even easier than it would quickly, so more www.nationalmortgagesettlement.com money, it’s really just have been to buy a car. When you look at the escrows are closing Denise Montalvo is a Realtor with Bradley Real Estate in San www.keepyourhomecalifornia.org a splash in the bucket Anselmo. 415/640-1850, email her at denise@bradleyrealwhole scenario, it really took two years, ’05 as a result,” says estate.com, or check out www.denisemontalvo.com. compared to the size and ’06, to completely collapse an industry Robert Bradley, 18 PACIFIC SUN JULY 6 – JULY 12, 2012