"The foreclosure settlement announced today will help build a stronger housing market while keeping more people in their homes. But while a significant step toward fixing the foreclosure crisis, this settlement was never intended or able to provide a comprehensive remedy. Much more work is required.
Despite its limitations, the settlement requires real reforms in the mortgage servicing industry to stop sloppy business practices and out-and-out fraud. It also will help stabilize housing markets and property values by giving more homeowners a chance to restructure or refinance out of unaffordable loans that are underwater.
The settlement calls for ramping up foreclosure prevention through large-scale use of loan modifications that lower loan balances for struggling homeowners. This approach could become a model for the rest of the market, especially Fannie Mae and Freddie Mac, which control 50% of the market.
The settlement includes these key strengths:
An end to robo-signing and other servicing abuses. Banks must review foreclosure documents individually, as law requires. Banks must treat delinquent borrowers more fairly by communicating better, reducing delays in the loan modification process, and waiting to foreclose until other avenues are exhausted.***UPDATE 3-13-12: Final settlement terms show that "dual tracking" will be restricted, but not prohibited entirely. If a homeowner submits a complete application for a loan modification within a certain time period, banks must wait to begin the foreclosure process while considering the request.***
Ways to hold banks accountable. The settlement provides release of loan origination and servicing claims against the banks by state attorneys general. However, the settlement preserves the right of individuals to pursue such claims. State and federal prosecutors can pursue claims of criminal violations, and attorneys general can initiate cases related to securities fraud and fair lending abuses.
Strong enforcement: Violations of the agreement will be enforceable in court by an independent monitor, applying significant penalties for parties that don't comply. The monitor will regularly assess bank performance against a series of metrics related to foreclosure processing and loan modification activities.
Today's settlement ends year-long talks over robo-signing and other abusive practices by mortgage servicers. This action is crucial to contain the damage foreclosures have heaped on our economy, but it is only one response—and one that is necessarily limited by legal and practical restraints. Addressing the massive foreclosure crisis requires additional policy actions on multiple fronts."