The massive settlement announced Thursday between attorneys general and several big banks means a lot of money changing hands, but it also means big changes to the way lenders handle defaults and foreclosures.
The settlement, joined by every state except Oklahoma – which negotiated its own settlement — closed at $26 billion. That amount probably isn’t enough to really punish banks, who in all likelihood put money away for this for the last several months in anticipation, but it probably will be enough to help struggling homeowners – even if only a little.
But the move goes far beyond the banks, and includes new rules and regulations for loan servicing and foreclosures going forward. They are expected to up customer satisfaction, reduce liability for banks, and clean out the robo-signing impasse and standardize the process in order to make it more efficient.
Specifically, it forces lenders to rethink how they interact with homeowners struggling to keep up with payments. They will no longer be able to attempt foreclosure on borrowers that they are simultaneously discussing mortgage modifications with, and they’ll have to give borrowers one point of contact instead of giving them several different employees for each interaction.
So while it’s true that only a small fraction of current foreclosures will be helped in any way, this means big things for the future mortgage servicing industry. It will speed up processing, and perhaps mean that foreclosures that have been waiting around since robo-signing came to light in 2010 will now gain legitimacy.
The settlement may not be as much as some were hoping for, but it does go a long way in streamlining the process and making it more logical — something I would expect after over 16 months of negotiations. This isn’t going to solve all of the problems we have right now, but its at least a step in the right direction. And at least, it’s over. For now.
