Consumer groups skeptical about mortgage settlement

Feb 10, 2012

OLYMPIA, Wash - Financial analysts say the big banks will feel little pain as a result of the multistate mortgage settlement announced Thursday. Meanwhile consumer advocates say some homeowners defrauded by banks will receive very little restitution.

State attorneys general and federal authorities celebrated the $25 billion dollar settlement with five big lenders. They said it would help distressed homeowners and stabilize the housing market. Washington Attorney General Rob McKenna said Washington state will reap about $648 million dollars as a result. But financial analysts say the settlement is small compared to what banks COULD have paid if states had sued successfully over “robo-signing” and other issues.

Christa Mazzone Palmberg is an organizer with Sound Alliance, which successfully advocated for Bank of America’s homeowner assistance center in downtown Seattle. She says the most troubling provision in the deal is one promising up to $2,000 to people who already lost their homes in foreclosure.

Palmberg: “I really struggle with that. I mean, I know it’s a step in the right direction. But I think if some of the persons making these decisions actually sat down across from people who lost their home and lost everything – to think that $2000 really makes a difference, I just think it’s kind of almost a slap in the face.”

The bulk of settlement funds are intended for principal reductions in existing mortgages. But the settlement only applies to homeowners whose mortgages are owned by the participating banks. They make up 20% of the mortgage market in the U.S. In exchange for the $25 billion dollars, state AG’s and federal agencies agree not to sue over improper foreclosures; they say homeowners are still free to sue even if they accept this aid.

Copyright 2012 Northwest News Network