Tags: Outrage | Mortgage | Deal

CNNMoney: Public Outrage Grows Over Mortgage Deal

By    |   Wednesday, 14 March 2012 12:32 PM

The nationwide mortgage deal is drawing outrage as more borrowers realize it won't help them.

The $25 billion foreclosure deal with the five largest banks is supposed to help about a million underwater homeowners lower their principal balances and about 750,000 refinance into lower interest rates. CoreLogic, a real estate research firm, reports that 11 million homeowners have mortgages exceeding their home values.

"The impact of this settlement will be small," said a Moody's Analytics Chief Economist Mark Zandi, according to CNNMoney. "It's not a home run. It's a single."

Many homeowners say they are angry because the settlement won't help homeowners who acted responsibly and didn't over-borrow. Instead, they'll pay for the settlement through their taxes.

"What I think is unfair," wrote Jamie Smith of Sonoita, Ariz., according to CNNMoney, "is that people who didn't overleverage their homes, who paid their mortgages on time, who didn't borrow more than they could afford, even if the bank said they could afford more, the people who had good common sense and have done the right thing, are left with all of this business loaded on their backs."

Homeowners with loans insured by the Federal Housing Administration or held by Fannie Mae or Freddie Mac are angry because they aren't eligible for the principal reduction.

"It's so frustrating because my loan is with Bank of America but since it's FHA," said a Seattle homeowner, Stacy Ovendale, told CNNMoney, "my mortgage is current and I have chosen to be responsible, there is nothing they can offer me in the way of principal reduction."

Proponents say everyone will benefit if the settlement re-energizes the housing market, but if Zandi is correct it won't even do that.

The federal government and 49 state attorneys general filed the agreement in federal court, calling it the largest ever federal-state settlement.

"We expect than many consumers across the country will soon start to see the significant direct relief and the new mortgage servicing standards that we negotiated as part of this settlement," said Iowa's Attorney General Tom Miller, according to MSNBC.com.

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Wednesday, 14 March 2012 12:32 PM
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