Because there’s no actual term sheet for the foreclosure fraud deal it’s virtually impossible to assess it, and every group who released a press statement calling it “a drop in the bucket” or a “down payment” or a “first step” should withdraw before the facts are known. But we should be talking about how the settlement will interact with the existing Administration policies around housing.
It’s clear that the Administration sees them all working together. The settlement will advance mandated principal reductions on bank-owned loans as well as loans bundled into mortgage-backed securities. Legislation will attempt to unlock refinancing for current underwater borrowers with that profile, and $3 billion in the settlement will go toward this purpose as well, though we don’t really know how (will it pay closing costs?
Will it guarantee the new refinanced loans?). For refinancing Fannie and Freddie-owned loans, there’s the tweaked HARP, which should come on line next month. There are active plans to extend forbearance, the ability to skip mortgage payments, for up to a year for unemployed borrowers, which Fannie and Freddie have picked up, along with FHA and some private lenders. And there is the new version of HAMP, which provides incentives to investors to do additional principal reductions.
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