Millions of American homeowners were likely excited when they first learned of the $26 billion mortgage settlement reached by banks and government officials. But on second view, they may not be so happy.
About 1 million homeowners will likely have their mortgage debt cut or their loans refinanced at lower interest rates. And about 750,000 people who had to give up their homes in foreclosures will garner between $1,500 and $2,000.
But about 50 percent of outstanding mortgages are excluded – those owned by the government agencies Fannie Mae and Freddie Mac.
Katherine Porter, a law professor at University of California Irvine, is concerned about the program’s limits. “We have to look at this as a modest settlement, even though $26 billion is an eye-popping number,” she tells The New York Times.
“There are millions of people who have lost their homes, and this settlement will only affect a relatively small number of them.”
Moreover, the plan gives banks three years to implement its provisions. “That three-year window makes me really nervous, because a lot of people could be out of their homes by then,” Porter says.
Others share her skepticism. “It is frankly a headline victory for both banks and attorneys general with a modest impact on the housing market,” Joshua Rosner, managing director of investment firm Graham Fisher, tells The Wall Street Journal.
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