Tags: Bove | Mortgage | Deal | Hell

Dick Bove: $25 Billion 'Mortgage Deal From Hell' Punishes Responsible Homeowners

Thursday, 09 February 2012 12:31 PM

A "mortgage deal from hell" between federal and state governments with big banks under which the latter will fork over more than $25 billion to aid struggling homeowners will do mainly one thing: punish responsible borrowers, says banking analyst Dick Bove.

Money will compensate victims of alleged foreclosure fraud and those who owe more on their homes then they're worth.

It's basically unfair and populist, says Bove, the vice president of equity research at Rochdale Securities, as those who made down payments and kept up with payments will see nothing while those who didn't will be rewarded.

"Those people lucky or smart enough to stop making payments on their homes may get their loan balances reduced," Bove tells CNBC.

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"Other beneficiaries of the agreement may be homeowners who have seen the value of their houses drop below the size of their mortgages. They get a freebie that other homeowners who have paid their mortgages down will not get," Bove adds, describing the ruling as "the mortgage deal from hell."

Analysts aren't too worried about the banks.

Five mortgage servicers named in the settlement — Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial — have set aside reserves for the expected cost of the agreement and investors may applaud the deal because it will do away one of many uncertainties facing the financial services industry.

"I wouldn’t say it’s a panacea for the housing industry but it is good for the banks to get this behind them," says Jason Goldberg, an analyst with Barclays, according to the New York Times.

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