The historic $25 billion foreclosure settlement between the
five biggest mortgage servicers – Bank of America, Wells Fargo, JPMorgan Chase,
Ally Financial and Citi – and their wronged homeowner clientele has been under
much scrutiny since its release date on February 9, 2012. Many analysts
are speculating on the settlement’s effectiveness in boosting the
country’s downtrodden real estate market ; others are blatantly pessimistic in
their stance that the $25 billion will do noticeably little to correct the
course of this sinking ship. When comparing the two driving monetary
aggregates –
1. total foreclosure settlement dispute = $25 billion
2. total negative equity in the US = $700
billion…
it is hard to maintain optimism when the sheer discrepancy
between diagnosis and remedy is so evident. As the son of a doctor, I can
make a medical comparison… it’s like applying a band aid to a broken
back. The foreclosure settlement may provide immediate protection on the
surface of the wound, but will likely do little for the long-term solution to
the real estate market’s broken framework.
As a native Los Angelean and member of the C.A.R., I
find myself evaluating the foreclosure settlement on the local [and state]
level. Although the nationwide settlement package may not boost the real
estate market on a national level, is it possible for some states and
local RE markets, say the Los Angeles market in California, to benefit
more relative to others? Further detailed scrutiny of the settlement statistics
on the local level will demonstrate a perhaps gloomy verdict:
·
The state of California is to receive $18
billion of the entire $25 billion settlement package
·
Of the $18 billion, the dependable Orange
County Register reports that $4 billion is being allocated to Los Angeles
County alone
Based on the above, we can assume each targeted relief area
– principle reduction, refinance assistance, recourse settlements, and wrongful
foreclosure via turbo-signing – of Los Angeles County will receive 22% of the
entire California settlement package. Extrapolating these reported
[national, statewide and local] figures a step further, each settlement
allotment provided by the California’s attorneys general Kamala Harris will
equate to:
·
55,000
LA HOMEOWNERS will be eligible for principle reductions who are
underwater on their loans and behind or almost behind in their payments, for an
average of $48,000 each
·
6,160
LA HOMEOWNERS who are current on their payments but underwater on
their loans will eligible for help with refinance programs like “HOPE”, for an
average of $30,321 each
·
30,800
LA HOMEOWNERS who were foreclosed upon between 2008 and Dec. 31, 2011,
will be eligible for an average check of about $1,993 each
·
7,040
LA HOMEOWNERS will be eligible for assistance with unpaid balances on
recourse loans that are remaining when their homes are foreclosed, for an
average of $109,375 each.
Will the above relief breakdown add enough stimulus to turn
around the Los Angeles County RE market? Or are there far too many homeowners
too far gone and too upside-down for the settlement relief for the LA County
markets to gain traction as a result? If we look at one last telling
reported figure, I may unfortunately need to refer to myself not as an avid
blogger, but as a bearer of bad news. According to Foreclosure Radar:
·
LA county saw $6 billion in foreclosures last
month alone
·
12,177 new foreclosure or notice of default
filings from Nov 7th, 2011 to January 16th, 2012, a mere
6 week span.
The far-reaching devastation of real estate crisis is so
vast in scope, that the steep number of new foreclosure stories will make it
difficult for any government solutions package to truly stop the
bleeding. and As a native Los Angelean, and speaking as an active Los
Angeles Realtor, it pains me to write this settlement package is likely NOT
WHAT THE DOCTOR ORDERED?