National Mortgage Servicing Settlement Progress Report: Little to Show (And Little Expected)

The official monitor for the mortgage servicing fraud settlement has put out a progress report on settlement implementation.  It's a preliminary report that is not required of the monitor, so I don't want to be too critical, but I hope future reports are more informative.  Most of the report consists of summarizing the settlement.  There is a lot of data, but almost no analysis.  Apparently the report from the first quarter of 2013 will evaluate performance under the settlement by 29 metrics.  We'll see how demanding that evaluation is.  Unfortunately, it will take at least two quarters to correct any problems that turn up, by which point we'll be heading into 2014.  But given what I've previously written about the settlement, I don't think delay isn't going to make it much worse. 

 The main point that stands out is the figure about how many borrowers have been helped:  137,000.  That's not a lot, even by HAMP's sad standard. Even if you add in refis and mods in progress, it's only 220,000 borrowers.  To put that in perspective, we have 11.4 million underwater mortgages in the US.  So we're looking at 1-2% of the underwater population getting help so far under the settlement.  But even that is being too generous.

Many, if not most, of these borrowers would have received relief without the settlement, so the real impact of the settlement MUCH less.  Moreover, the banks also slowed down and stockpiled loss mitigation pre-settlement so as to get credit for it under the settlement.  Thus far, then, it doesn't seem like the settlement has helped a lot of additional people. Not much of a surprise.  Well, time to unfurl the Mission Accomplished banner.   

The other key figure is how much relief the settlement has given per borrower.  Things look better here at first glance.  The average relief per borrower--$76,000--is not insubstantial.  But the form it comes in isn't ideal.  Most (81%) of the relief came via short sales and deeds in lieu (included in the short sale statistic).  Remarkably, 46% of total relief from BoA short sales/DIL.  Short sales and DIL aren't exactly relief for a homeowner:  the homeowner losses the house.  It's the same result as a foreclosure, just minus the foreclosure sale expenses.  Sometimes it is the right outcome, and short sales should have been happening in much greater volume than have occured (and there was nothing preventing these short sales prior to the settlement).  Still, the bottom line here is that very little of the relief under the settlement thus far has helped borrowers keep their homes.  

The final thing that stands out here is the size of the average short sale loss (or at least that's what I read the figure as presenting):  $116,000.  That's nearly as large as the average mortgage loan.  Obviously the short sales are happening with a non-representative group, but this just raises the question of why the banks weren't modifying these loans earlier.  If the bank will eat a $116k loss in a short sale, sure it can do a loan mod that costs it something less (say $75k) and keeps the borrower in the home and paying.  But as I've said, the whole settlement is farcical, a free pass gussied up in the clothing of law. 

Last observation:  nearly half the relief has gone to CA.  Bully for Kamala Harris (she got the best of a bad deal), but what does it say about the deal the other states took?  

Comments

[Mike Dillon]

Gee.... Thanks for that incredibly uplifting and spirit raising review there, Professor Sunshine... ;)~

In fact, I completely agree with you. The only silver lining in this thing, if there WAS one to be found, was the money that the states wrangled out of the Big 5 et al. The obvious problem is that some states are trying to use that specifically earmarked money for budget balancing, etc. Some states, like New Hampshire, still haven't put the money to use despite the fact that it's been in-state for approximately 60 days. And given recent decisions by those controlling the money and an apparent lack of planning, I'm not sure that NH property owners are going to see any assistance from it anytime soon.

Personally, I think that, at least in cases involving REMICS, there is too much money to be made in various insurance policy claims. One Q that I haven't seen addressed is where have pmi payouts been during all of this?

[jylly jakes]

David Dayden at Firedog Lake observed that the short sales the banks are seeking credit for are largely taking place in non recourse states where the short fall on the mortgage would not be possible for the banks to recoup anyway. So, in effect, the banks are actually getting something (ie credit towrds their punative damages) where normally in the 11 states (California one of them) the banks would not have the legal right to pursue the outstaning losses of the short sale. One of the immediate reforms should be to stop allocating non recourse state short sale debt forgiveness as counting towards their 'punishment'. This settlement has performed as expected. And the banks, are not eating the losses, the pension funds, retirement funds and other investors ultimately bear the losses. The same retirement accounts of cops and teachers that are being asked to contribute more to their plans because the portfolio managers don't want to 'rock the boat' by suing the trustees that are ripping them off with errounous fees and other losses attributable to unecessary foreclosures and pretend loss mitigation actions. The mortgage settlement is essentially another way of letting the banks off the hook for their crimes against humanity. Six million families have been forclosed on, themedia is still focused on the fantasy that six million people decided to force global banks to extend credit, by force ? Or deception? And the global banks were tricked into lending to predatory borrower. These same predatory borrowers then collectively decided to stop paying their mortgages to be kicked out into the street as punishment for their crime of receiving credit for a mortgage they should never have received. That's right these poor banks posing as the lenders were the victims of six million average American familes forcing them to extend mortgages on fraudulent incomes, appraisals and credit ratings. Now these same feckless global institutions are suffering because they are allegedly taking on losses from short sales and loan modifications that are deliberately the result of average Americans taking on too much mortgage debt. The narrative of the dead beat home owner beats on. I'm going to say a special prayer for these deceived and victimized global banks so that they may be made whole again for their suffering at the hands of the predatory borrowers of America.

[fedelina roybal-de-aguero trustor, trustee, dib 12-13397]

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So i will write again and follow my name through bankruptcy courts, and eberwein because he volunteered to be part of test to see what happened to a person with good credit and whendo they comply with the new laws in the states where they no litigation is up and running [email protected], motion in limine 2, will show you the suffering because of the debt collector dis-obeyance of these laws even after President Obama gave a start day and stop date, and they this small ban of praying military individuals tracked the entire event from state to state. most of the trans actions are required to be done by cash. They have unlawful detainer trials asking for possession and no money so that you can not discuss what happen or the condition of the property. so i have to go get rest and will be sending Edstrom, all the documents he and he see where when he filed his first time bankruptcy case there was business case opened in Sacramento which had class actions involving Deutshe Bank new to handle her