$26 Billion Settlement Meager Compared to Damages
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UPDATED: Feb 9, 2012
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Today the five largest home loan originators, Wells Fargo, Bank of America, Citigroup, JP Morgan Chase and Ally Financial, agreed to one of the largest government-industry settlements of $26 billion. The money from this settlement will be distributed amongst victims of these banks’ “robosigning” practices, which involved signing away on filed foreclosures without reviewing the actual contents or offenses. The practice of robosigning led to countless false foreclosures, evicting innocent homeowners without reason.
But despite this agreement for such enormous sum, unhappy critics have emerged and are voicing their opinions.
“The bottom line about this settlement is it’s okay, it’s a step forward, it’s in the right direction,” said Ira Rheingold, executive director of the National Association of Consumer Advocates, in a Reuters’ article. “But let’s not kid ourselves, there’s a hell of a lot more that needs to be done.”
And Rheingold’s analysis may not be very far off, particularly considering the amount of damages the faulty mortgage loans and invalid foreclosures have cost the country.
According to Bloomberg News, all of the illegitimate business practices that contributed to the housing crisis have amounted to an astounding $72 billion—nearly three times as much as the settlement.
When looking at such astronomical numbers, the $26 billion settlement, the highest of any government-industry settlement in ten years, looks meager and weak to some.
In addition to nearly $50 billion still lost or in the pockets of those who arguably took part in contributing to the economic mess, Evercore analyst Andrew Marquardt explained another problem with this settlement to Forbes. “The caveat is there are still a lot of lingering mortgage issues.”
Homelessness, relocation, loss of employment, continued foreclosure, unidentified fraudulent activity, decimated credit scores, and loss of home loans: Marquardt brings up a good point.
But to the banks and those who are charged with shelling this money out, the matter appears to be resolved. As Ally Financial explained to Forbes, “The agreement brings closure to these issues and enables the company to move forward in our ongoing efforts to help borrowers find affordable and sustainable payment relief whenever possible.”