Wouldn’t you like to get paid more for something that you already do? In this case, the banks will get that opportunity to recoup some of their $25 billion foreclosure abuse settlement by doing things that they already do but worse will not stop people from being foreclosed upon.
Consider that the banks can eliminate more than $2 billion of their obligation by donating or demolishing abandoned houses. So now the banks may move into the demolition business. Moreover, almost $1 billion can be used to help families who have already defaulted move out.
Upon closer inspection of the settlement, it turns out that only 60 percent of the $17 billion designated for borrowers, or $10.2 billion, must be used to reduce principal for borrowers who have homes that sit underwater.
Even for homeowners who do receive principle reduction, the average amount that a homeowner could receive would total about $30,000 which would not go very far to help a homeowner cure a default situation here in the Bay Area.
The more we look at the settlement deal the more it looks like a small dog – all bark and no bite.