Monday, January 30, 2012

Mortgage Settlement: States face "end-of-the-week deadline"

by Bill McBride on 1/30/2012 03:42:00 PM

From Reuters: States to decide this week on mortgage deal

State and federal officials are close to a settlement with the largest U.S. banks over mortgage abuses, with states facing an end-of-the-week deadline to decide whether they will sign on, people close to the talks said.

... negotiators have overcome a sticking point and agreed on Joseph Smith, North Carolina's banking commissioner, as a monitor to ensure the banks comply with the terms of the settlement ...

In exchange for up to $25 billion, much in the form of cutting mortgage debt for distressed homeowners, the banks will resolve civil state and federal lawsuits about servicing misconduct and faulty foreclosures, and state lawsuits about how they made some of the loans.
If this settlement goes forward (and I expect it will), then there will be more modification and foreclosure activity in coming months.

This is just one of several policy changes in the works including the automated HARP refinance program (starts in March) and a possible GSE REO to rental program. Plus the Federal Reserve is "contemplating issuing guidance to banking organizations and examiners" to allow banks to also rent more residential REO.

Currently, according to LPS, there are 1.79 million loans 90+ days delinquent and an additional 2.07 million loans in the foreclosure process.

As I noted earlier this year, it appears the overall goal of these policy changes is to reduce the large backlog of seriously delinquent loans while, at the same time, not flood the housing market with distressed homes.