Five of the nation’s largest banks agreed on February 9 to pay $25 billion in relief for the two million American homeowners affected by the housing bubble, settling a lawsuit brought by the United States federal government over abusive mortgage practices.
While the agreement may be the broadest effort yet to provide assistance to homeowners with bad loans, sources agree it will help only a small portion of borrowers.
“You’re hardly skimming the surface,” said Paul Dales, a housing economist with Capital Economics, responding to the settlement.
The settlement creates “a legal morass for lenders” and leaves “a red tape nightmare for millions struggling to hang onto their homes,” MSNBC reports.
Three years ago, President Barack Obama made a similar announcement regarding a foreclosure assistance program that cost $50 billion and also sought to aid suffering borrowers around the country.
Today, the program, known as HAMP (Home Affordable Modification Program), is largely considered a failure. Only one in five HAMP applicants received permanent loan modifications, and the program failed to lead to an increase in modifications.
In an article titled “Our Guide to Obama’s Floundering Foreclosure Programs,” Propublica documents the Obama administration’s failed efforts to mitigate the foreclosure crisis.
Propublica describes the list as “sobering,” pointing out that “Obama himself has called his approach to the foreclosure crisis one of his biggest mistakes [in] dealing with the recession.”’
Other programs included letting underwater homeowners refinance with lower interest rates and loaning money to jobless Americans so they could avoid foreclosure.
The former program simply failed to affect the hardest-hit Americans. As a member of the National Association of Consumer Bankruptcy Attorneys told iWatch News, “Anything that is called a ‘refinancing’ program is just a joke.”
The attempt to loan jobless money to maintain mortgage payments also had only a minimal impact because few qualified for this special loan program.
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